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December 22, 2014

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Fitch downgrades School District’s outstanding general obligation bond ratings

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.

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  1. Odd that Fitch, or this article, did not mention TRANSPARENCY as being a positive contributing factor in keeping the AA- rating. Honesty is always the best policy when being a public institution.

    For the most part, the school district has been as prudent as possible in recent years, in part, not having to purchase parcels of properties to continue building school facilities (a cost savings, to be sure). In some ways, leveled growth, means that now the whole Clark County will now need to change direction in planning, and strengthen what remains, as with time (and pressure), turning the raw coal of the county into the gleaming diamond that is long treasured in the end.

    Because we no longer need to grow in size any longer, we can focus into becoming BETTER. Things are really looking up, stay strong, and keep the faith folks!

    Blessings and Peace,
    Star

  2. There is a big problem with the School District's proposed property tax increase. The problem is that the taxpayers have no guarantee that this money will go towards maintenance, repair, and the two new schools. It could go to pay raises, new hires or anything else. Here is where the problem is. If unions demand arbitration, the Arbitrator can require the District to pay those raises, etc. Then the District will pool the money from the proposed property tax increase into the general fund to make the payment. The District will also use currently allocated funds for maintenance and repair to pay raises instead of monies allocated by the state. I will be voting NO on the Tax Proposal.