Content provided in partnership with

Business Services Industry

Fitch Rates Clark County School District's $675MM GOs 'AA'

Business Wire, May 13, 2008

SAN FRANCISCO -- Fitch Ratings assigns an 'AA' rating to Clark County School District, Nevada, $675 million general obligation ([GO] limited tax) building bonds series 2008A. Fitch also affirms the 'AA' rating on Clark County School District's (the district) $4.5 billion outstanding GO (limited tax) bonds. The bonds are scheduled to sell competitively on May 15. The Rating Outlook is Stable.

The bonds are GOs of the district, subject to constitutional and statutory limitations on the aggregate levy of ad valorem taxes.

Most Popular Articles in Business: Research and Markets : Tesco Plc - SWOT Framework Analysis; Do Us a Flavor - Ben & Jerry's Issues a Call for Euphoric New Flavors; eBay made easy: ready to start an eBay business? These 5 simple steps will ...; Katrina's lawsuit surge: a legal battle to force insurers to pay for flood ...; Wal-Mart's newest distribution center opened last month near the southwest ...; More »

The 'AA' rating is based on Clark County School District's large and expanding economic base, strong property tax revenue growth, moderate debt levels aided by rapid amortization, adequate financial position supported by a sizeable state funding guarantee, and good long-term capital planning and management practices. Credit risks include the overall economic slowdown precipitated by the significant weakness in the residential housing market, which has resulted in slower assessed valuation (AV) and pledged property tax revenue growth.

This issuance is the final series under the district's 1998 bond authorization which permits unlimited bond issuance secured by a fixed tax rate. Bond security is enhanced by the statutory reserve account of the debt service fund, required to be funded at the lesser of 10% of outstanding par or 100% of the next fiscal year's debt service. The estimated balance as of the end of fiscal 2008 will be approximately $614 million, compared to the reserve requirement of $524 million. In addition, the GO pledge provides some credit strength, although both operating and debt service levies are at their maximum rates and the general fund unreserved balance is thin. District projections are for slower property tax revenue growth in the near term and Fitch expects the district to adjust its long-term capital planning to reflect the adjusted expectations.

Debt service payments on the bonds additionally secured by pledged revenues will rely on the room and real property transfer tax since the limited ad valorem property taxes are fully utilized for the outstanding bonds, and property tax growth is likely to see very slow growth in the near term. Room and real property transfer taxes are both economically sensitive revenues which have fluctuated historically. While room tax revenues have recently shown sound growth, real property transfer taxes declined 45% since 2006. Fiscal 2007 ad valorem property taxes together with the room and real property transfer tax revenues adequately cover debt service, although Fitch is concerned that a continuation of the marked decline in the housing market could cause a significant erosion of available ad valorem and real property transfer tax revenues. This concern is mitigated by the large $353 million accumulated balance in the capital projects fund, into which room and real property transfer tax revenues are deposited, as well as the $614 million accumulated in the debt service fund.

The district operates the nation's fifth largest school system, serving an estimated 308,745 students for the 2007-2008 school year, up by over 64,000 since 2001-2002. Enrollment growth has slowed from a peak of 5.1% in 2003-2004 to 2.0% in 2007-2008. The district is coterminous with the county and includes the cities of Las Vegas, North Las Vegas, Henderson, Boulder City, and Mesquite as well as unincorporated areas for a total of 7,927 square miles.

The district's financial operations have been strong, enabling it to add to the fund balance in the five of the last seven fiscal years and deficits have been due to planned capital spending. Fund balance at the end of fiscal 2007 equaled $156 million, a good 8.8% of expenditures and transfers out. The undesignated portion was $39 million (2.2% of expenditures and transfers out), above the district's policy of unreserved fund balance equal to at least 2.0% of budgeted revenues. In fiscal 2008 the district responded to mid-year state funding reductions by delaying programs and a one-time software investment, freezing non-school hiring and returning a state grant. In addition, the district transferred about $15 million from a special revenue fund to reimburse indirect costs with grant monies. The district projects ending fiscal 2008 with a drawdown of about $19.6 million, consistent with its original budget. Nonetheless, fiscal year 2008 projections include an unreserved general fund balance of $42.9 million, slightly above its reserve policy. The district's tentative budget for fiscal 2009 projects an additional drawdown of about $47 million, while maintaining the unreserved fund balance at over $45 million and above its 2% of spending policy.

Clark County's current economic picture is mixed; the tourism sector (about 20%-30% of the economy) still seeing good albeit slower growth. Meanwhile, the housing sector and construction-related jobs and revenues are continuing to deteriorate. Healthy assessed value gains had been supported by high levels of commercial and residential construction, but AV growth is projected at just 6% in fiscal 2009, compared to 19% in fiscal 2008 and 40% in fiscal 2007. Taxable sales are down about 0.4% year over year for July through February and the real property transfer tax is projected to decline another 27% in fiscal 2008 in addition to the 25% decline in fiscal 2007. Construction jobs have declined modestly in 2007, and may be supported by major resort and casino construction underway and in the planning phases. Meanwhile, tourism-related data are slowing but remain positive. Room taxes were up 6% in 2007 compared to 7.3% growth in 2006, with hotel occupancy rates declining slightly to 87% for the fiscal year through February 2008 compared to 90% in 2007. The county expects to add over 29,000 new hotel rooms by 2012. Finally, the county unemployment rate in 2007 increased to 4.8% in 2007, compared to 4.2% the previous two years. Estimates for March 2008 indicate the unemployment rate has deteriorated further to 5.6%, compared to 4.3% for March 2007.

Business Services Industry

Fitch Rates Clark County School District's $675MM GOs 'AA'

Business Wire, May 13, 2008

Find Research Guides for:

Find Featured Titles for: Home & Garden

Most Popular Articles in Business

Most Popular Publications in Business