State’s bond rating stays strong

Friday, Aug. 29, 2003 | 9:38 a.m.

CARSON CITY -- Despite the turmoil in the Legislature over taxes and an uncertain economy, the state has retained its strong bond rating.

State officials had worried that Nevada might suffer a fate similar to California, which had its bond rating downgraded. But Nevada Treasurer Brian Krolicki told the state Board of Finance Thursday that three bond rating agencies have agreed to maintain the present AA or better rating for Nevada.

Krolicki said representatives of Moody's Investors Service, Standard & Poor's Rating and Fitch Rating met last week with officials from his office and the state Budget Division.

"They interrogated us," Krolicki said.

One of the big issues, he said, was the Legislature's decision not to replenish the state's Rainy Day fund, unless tax revenues come in higher than expected next year. But, he added: "They know we have a very conservative financial approach and they feel management would respond quickly to any shortfall."

So the state has an AA 2 rating from Moody's, an AA rating from Standard & Poor and an AA-plus from Fitch.

Keeping good bond ratings means the state will get to pay low interest rates on nearly $120 million in bonds that will soon be sold, Krolicki said.

The finance board on Thursday approved the issuance of those bonds: $96 million, mostly for projects in the University and Community College System; $2 million for cultural affairs grants to local projects and $20.4 million for water grants to various small towns.

Moody's report noted that Nevada "has a history of strong budget management and quick response to revenue tightening."

The report also said the combination of the tax increases and spending restraint by the Legislature will produce a balance of 5 percent of revenue on June 30, 2004, to help the state pay its bills. Standard & Poor's said: "Financially, the state's condition is stressed but manageable."

Krolicki said the rating agencies "were monitoring the situation particularly at the end of the Legislature."

The fact that the Legislature passed the $836 million tax bill by a two-thirds majority was a positive factor in keeping the high ratings, said Krolicki.

Both Moody's and Standard & Poor's reports noted the casino business, the state's main industry, faces competition from Indian casinos in adjacent California.

Moody's said: "The expansion of gaming in California, while not a short-term risk, poses some economic risks to Nevada over the long term." Most of the major Indian casinos are closer to Reno and Lake Tahoe, the Standard & Poor's report noted.

"If the Las Vegas area can keep a resort and convention focus, it may face an easier time attracting visitors in the face of competition than the northern part of the state," the report said.