Fitch Rates Clark County School District, NV $450MM GOs 'AA'

Business Wire, Oct 8, 2004

SAN FRANCISCO -- Fitch Ratings assigns an 'AA' rating to $450 million Clark County School District, Nevada, general obligation (limited tax) building bonds, series 2004D. Fitch also affirms the 'AA' rating on Clark County School District's (the district) $2.9 billion outstanding general obligation bonds. The Rating Outlook is Stable. The bonds are scheduled to sell competitively on October 13, with Nevada State Bank Public Finance acting as the district's financial advisor.

The 'AA' rating is based on the district's large and growing economic base, strong assessed value growth, moderate debt levels, adequate financial position, and good long-term capital planning and management practices. These factors are offset somewhat by growth-related financial and capital pressures. The rapidly expanding population continues to translate into strong demand for additional school facilities. These capital needs are addressed primarily through voter-approved limited tax general obligation (GO) and limited tax GO revenue bond sales. Although still heavily dependent on the tourism and gaming industries, the district economy continues to diversify.

The district operates the nation's sixth largest school system, serving a fiscal 2004 student population of 268,357, or roughly 70% of all school children in the state. The district population is more than 1.7 million; nearly one million above the 1990 population. Clark County (the county) and district boundaries are coterminous and include the cities of Las Vegas, North Las Vegas, Henderson, Boulder City, and Mesquite. Enrollment growth has averaged 5.7% annually since 1999 and is expected to continue. Labor relations are good with four-year agreements in place.

The district area economy is sound. Although concentrated in tourism and gaming, construction and local service industry jobs continue to expand and diversify the economy. Considerable construction activity has contributed to healthy assessed value gains. In addition, economically sensitive taxes, including sales taxes, transient room taxes, and real estate transfer taxes, continue to rebound to above pre-Sept. 11 levels. Unemployment levels in the Las Vegas MSA continue to decline, ending August 2004 at a much improved 4.0%, as compared to 5.5% in August 2003. County income levels closely match those of the state but are slightly above national averages. Double-digit assessed valuation gains continue into fiscal 2005, rising nearly 12.6%, with a six-year average annual increase at 11.4%.

The district's finances remain adequate and slightly improved as of fiscal 2003, with a healthy surplus projected for fiscal year-end 2004. Unaudited data estimate the 2004 general fund ending balance at $93.6 million-a dramatic rise from its $47.1 million level in fiscal 2003. However, the district intends to spend down its fund balance as it has reserved $32 million for a new district business system to be implemented during fiscal years 2005 and 2006, along with other one-time expenditure on transportation needs. Nonetheless, the fiscal 2005 budget maintains the unreserved and undesignated fund balance at the 2.0% level.

The district is authorized, under an election held on November 3, 1998, to issue additional general obligation bonds until June 30, 2008, provided that such bonds can be paid within the existing property tax rate for school bond debt service. Bond proceeds, along with approximately $1.7 billion in bonds that have been issued so far, will finance new school construction, school renovation and modernization projects, as well as two new bus transportation satellites (a 10-year capital expenditure known as the '1998 Capital Improvement Program'). Proposed repayment sources include property taxes, a portion of the district's share of room tax and real estate transfer tax revenues, along with general fund and other building fund resources. Ultimate bond security remains the full faith and credit of the district and the limited ad valorem tax levy.

Debt levels are and should remain moderate, as additional bonds are offset by rapidly rising population and assessed values, along with rapid amortization of outstanding debt (61% in 10 years). Direct debt level is $1,977 per capita and 2.4% of market value, while overall debt level is 2,196 per capita and 2.6% of market value.