Fitch Ratings assigns an 'AA' rating to $21.1 million
City of Las Vegas, Nevada, general obligation (limited tax) various
purpose refunding bonds (additionally secured by pledged revenues),
series 2005B. Fitch also affirms the 'AA' rating on all outstanding
general obligation bonds, which total $300.7 million. The Rating
Outlook on all bonds is Stable. Bond proceeds will refund $15 million
in outstanding general obligation revenue bonds, series Nov. 1, 1998B,
and $7.0 million in general obligation revenue bonds, series Oct. 1,
1999. The bonds will be sold competitively on June 21 with Nevada
State Bank Public Finance acting as the city's financial adviser.
The 'AA' rating reflects sustained growth in Las Vegas's large and diversifying economic base and the city's sound reserves and prudent debt and financial policies. These factors are balanced somewhat by a decreasing but still significant reliance on tourism and gaming, as well as recent fiscal pressure on the general fund. Las Vegas maintains healthy fund balances, which help offset concerns over a somewhat volatile revenue base, while preserving substantial flexibility in the city's operating property tax levy.
The Las Vegas area represents a substantial portion of Nevada's tax and employment base, which has benefited from the region's expanding population and economic growth. Recent development, both within the city and throughout Clark County, continues to generate greater employment diversity, helping to offset concerns over dependency on tourism and gaming, fluctuations inherent within these industries, and their effects on city revenues. Nonetheless, the region remains dominated by gaming.
Assessed valuation gains have been substantial due to new building, as well as rising property values. Assessed values rose a strong 10.8% in fiscal 2005 and averaged 9.5% per year from fiscal years 2000-2005, aided by building permit activity that remains healthy and fairly stable. In response to rapidly-rising property tax bills, a recently passed state legislation will limit annual property tax bills to a 3% increase for most homeowners and 8% for commercial and rental property owners. While it is too soon to quantify the impact of such legislation on future property tax revenue growth rates, city management expects new construction and development to help offset potential losses and shore-up the already strong property tax base. Fitch will continue to monitor and report on this as more data become available. City wealth indicators are slightly above average, trending higher than both state and national averages. Las Vegas and Clark County unemployment levels have historically remained slightly above national levels, but recent data indicate a trend reversal.
Financial operations are marked by sound reserve levels despite recent general fund operating deficits and good fiscal management policies. The total general fund balance, most of which is unreserved, ended fiscal 2004 at a healthy 15.4% of expenditures, transfers out, and other uses. Preliminary data for fiscal 2005 expect a small $1.5 million drawdown of the general fund, with the fund balance ending the year at a still healthy 13.5% of spending. While the general fund balance has been on a downward trend recently, these drawdowns funded recreation projects and are one-time in nature. Although a continued fund balance drawdown is a cause for concern, the risk is mitigated somewhat by the city's ability to increase its operating tax levy if needed. Fitch expects the general fund balance level to remain at or above the 12.0% council-mandated minimum and looks for the city to begin replenishing the fund balance in fiscal 2006 as recreation projects will have been completed.
The city's debt burden is low to moderate and will likely remain so as rapid amortization offsets likely additional debt. In addition, a substantial portion of general obligation debt outstanding is supported from nonproperty tax revenue. Amortization is rapid, with 74% of debt retired in 10 years. Including overlapping debt, total overall debt ratios are moderate, at $2,147 per capita and 3.3% of market value.
Fitch's rating definitions are available on the agency's public web site, www.fitchratings.com. Published ratings, criteria and methodologies, and relevant policies and procedures are also available from this site, at all times.
The 'AA' rating reflects sustained growth in Las Vegas's large and diversifying economic base and the city's sound reserves and prudent debt and financial policies. These factors are balanced somewhat by a decreasing but still significant reliance on tourism and gaming, as well as recent fiscal pressure on the general fund. Las Vegas maintains healthy fund balances, which help offset concerns over a somewhat volatile revenue base, while preserving substantial flexibility in the city's operating property tax levy.
The Las Vegas area represents a substantial portion of Nevada's tax and employment base, which has benefited from the region's expanding population and economic growth. Recent development, both within the city and throughout Clark County, continues to generate greater employment diversity, helping to offset concerns over dependency on tourism and gaming, fluctuations inherent within these industries, and their effects on city revenues. Nonetheless, the region remains dominated by gaming.
Assessed valuation gains have been substantial due to new building, as well as rising property values. Assessed values rose a strong 10.8% in fiscal 2005 and averaged 9.5% per year from fiscal years 2000-2005, aided by building permit activity that remains healthy and fairly stable. In response to rapidly-rising property tax bills, a recently passed state legislation will limit annual property tax bills to a 3% increase for most homeowners and 8% for commercial and rental property owners. While it is too soon to quantify the impact of such legislation on future property tax revenue growth rates, city management expects new construction and development to help offset potential losses and shore-up the already strong property tax base. Fitch will continue to monitor and report on this as more data become available. City wealth indicators are slightly above average, trending higher than both state and national averages. Las Vegas and Clark County unemployment levels have historically remained slightly above national levels, but recent data indicate a trend reversal.
Financial operations are marked by sound reserve levels despite recent general fund operating deficits and good fiscal management policies. The total general fund balance, most of which is unreserved, ended fiscal 2004 at a healthy 15.4% of expenditures, transfers out, and other uses. Preliminary data for fiscal 2005 expect a small $1.5 million drawdown of the general fund, with the fund balance ending the year at a still healthy 13.5% of spending. While the general fund balance has been on a downward trend recently, these drawdowns funded recreation projects and are one-time in nature. Although a continued fund balance drawdown is a cause for concern, the risk is mitigated somewhat by the city's ability to increase its operating tax levy if needed. Fitch expects the general fund balance level to remain at or above the 12.0% council-mandated minimum and looks for the city to begin replenishing the fund balance in fiscal 2006 as recreation projects will have been completed.
The city's debt burden is low to moderate and will likely remain so as rapid amortization offsets likely additional debt. In addition, a substantial portion of general obligation debt outstanding is supported from nonproperty tax revenue. Amortization is rapid, with 74% of debt retired in 10 years. Including overlapping debt, total overall debt ratios are moderate, at $2,147 per capita and 3.3% of market value.
Fitch's rating definitions are available on the agency's public web site, www.fitchratings.com. Published ratings, criteria and methodologies, and relevant policies and procedures are also available from this site, at all times.
© 2005 Business Wire
