Fitch downgrades School District’s outstanding general obligation bond ratings

By Paul Takahashi

Wednesday, Sept. 5, 2012 | 6:05 p.m.

A Wall Street credit rating firm downgraded $3.8 billion of Clark County School District debt but revised its outlook on district bonds from negative to stable.

Strained labor relations played a part in Fitch Ratings's announcement Wednesday to downgrade the School District's outstanding general obligation bonds from A+ to AA-.

Other key factors in Fitch's rating downgrade included the district's low ending fund balance for emergencies, continued declines in property tax revenue and the district declining tax base.

"This news is par for the course in this downturned economy," said district spokeswoman Amanda Fulkerson. "We will continue to work within our budget to make sure we have the best return on investment when it comes to education."

However, with tourism, gaming and retail returning to Las Vegas, the financial outlook for the nation's fifth-largest school district serving some 309,000 students has improved, according to Fitch.

"Tourism- and gaming-related revenues are improving county and statewide, which will aid somewhat in the district's funding," Fitch said, adding that while property values were still low, state funding for education improved in the 2011 legislative session. "Given the state's improving revenue, Fitch views as reasonable the district's expectation for stable funding."

Despite the stable rating, Fitch noted that the district had made $300 million in spending cuts since 2010, which included administrative and staff cuts, textbook and supply reductions, reduced busing and labor concessions.

Fitch's bond ratings won't affect the School District's proposed property tax increase, which if approved by voters in November would levy an additional $74 per every $100,000 in assessed home value. That's because the district is pursuing a "pay-as-you-go" capital plan, not a bond program.

If the initiative doesn't pass, the district "has some flexibility to delay projects, which are primarily renovation and modernization," Fitch said.

Fitch may downgrade the School District's debt rating in the future as costs for the state pension system is expected to skyrocket. Debt, pensions and other post-employment benefits represent about a third of district spending, Fitch said.