Nevada credit rating raised

Wednesday, Aug. 17, 2005 | 10:56 a.m.

CARSON CITY -- Nevada's credit rating was boosted a notch Tuesday, meaning taxpayers in the future will save millions of dollars when the state sells its bonds.

State Treasurer Brian Krolicki said the decision by Moody's to raise the rating "is truly a significant tribute to Nevada's strong financial position and practices."

With the upgrade, general obligation bonds increased from an Aa2 to an Aa1. This was the first upgrade by Moody's since 1977.

Other debt rating firms may also follow suit.

Fitch Ratings has the state's bonds at AA+, and Standard & Poor's puts Nevada at AA.

Krolicki said Standard & Poor's has the state on "a positive outlook" and he hopes the company will raise the rating in the future.

Moody's, in announcing the upgrade, said that although the state depends heavily on gaming, "the economy and the related state revenues have proved remarkably resilient over the last several years, after being tested severely in the months following the 9/11 attacks and the 2001 recession."

Among Nevada's credit strengths, Moody's said, the state has an "economy whose growth now is virtually unparalleled among the states." It said that state has "conservative management that reacts quickly during periods of both weakness and growth." And the debt ratio of Nevada is below the 50-state median.

The challenge facing Nevada, Moody's said, is the expansion of tribal gaming in California that "may eventually erode Nevada's steady stream of visitors from California. The impact of this California gaming is already evident in some markets in Nevada."

The rating firm said Nevada's economy is more risky than more diverse states because of its concentration on gaming. It said this economy "requires very active management from its finance officials, who need to be ready to act when revenues soften."

In upgrading the state, Moody's said it gave "much weight to the state's strong budget management, which has proven its ability to respond quickly to downturns and to react prudently during flush times."

Krolicki said those who have already invested in Nevada bonds are "about $100 million better off today than they were yesterday" because of the upgrade. He said those bondholders would be able to sell the bonds at a higher price.

About $2.5 billion in general obligation bonds will be affected, said Moody's.

The treasurer added that the "cost of future debt will be lowered by millions of dollars due to this higher rating."

The state is getting ready to sell $47 million in bonds next week.

The upgrade will also affect the $44 million in certificates of participation, used by the state for lease purchases. That rating rose from Aa3 to Aa2.

The credit change came after a group of Nevada officials, led by Krolicki, approached the rating agencies, touting the strong financial position of the state. The group told the rating agencies that Nevada has a better economy than 18 other states that have higher bond ratings.