Las Vegas, NV Debt Rating Outlook Revised To Positive On Growing Tax Base And Strong Overall Financial Profile

CENTENNIAL (S&P Global Ratings) Jan. 11, 2019--S&P Global Ratings revised its 
outlook to positive from stable and affirmed its 'AA' long-term rating and 
underlying rating (SPUR) on Las Vegas, Nev.'s general obligation (GO) bonds 
outstanding and its 'AA-' long-term rating on the city's existing certificates 
of participation. At the same time, S&P Global Ratings assigned its 'AA' 
long-term rating, with a positive outlook, to the city's series 2019A GO 
limited-tax building bonds and 2019B GO limited tax medium-term bonds.

"The revised outlook reflects the city's strong incomes and growing tax base 
through valuation increases and new construction in the area, with assessed 
value growing by an additional 45% in the previous six years," said S&P Global 
Ratings credit analyst Michael Parker.

Although the tax and employment bases are somewhat concentrated in tourism and 
gaming, the city's overall employment industries have been diversifying in 
recent years. Moreover, the visitor industry was relatively resilient during 
the recession, as room rates largely adjusted to maintain significantly 
above-average occupancy levels in citywide hotels. The economic recovery in 
Las Vegas, and largely across Nevada as a whole, has translated to strong 
revenue growth for the city, particularly in consolidated taxes and property 
taxes.

"The city's strong overall financial profile, evidenced by the maintenance 
very strong fund balances and relatively balanced budgets over the last 
several years, supports our view of the city's creditworthiness," Mr. Parker 
continued. "Adding to the city's credit strength are management's very strong 
financial policies, along with a manageable debt profile supported by overall 
debt as a percentage of market value below 3% of citywide taxable value."

The ratings reflect our opinion of Las Vegas':

  • Strong economy, with access to a broad and diverse metropolitan statistical area;
  • Very strong management, with strong financial policies and practices under our Financial Management Assessment methodology;
  • Strong budgetary performance, with a slight operating surplus in the general fund and an operating surplus at the total governmental fund level in fiscal 2018;
  • Very strong budgetary flexibility, with an available fund balance in fiscal 2018 of 21% of operating expenditures;
  • Very strong liquidity, with total government available cash at 79.2% of total governmental fund expenditures and 9.5x governmental debt service, and access to external liquidity we consider exceptional;
  • Adequate debt and contingent liability profile, with debt service carrying charges at 8.3% of expenditures and net direct debt that is 99.1% of total governmental fund revenue, as well as low overall net debt at less than 3% of market value; and
  • Strong institutional framework score.
The positive outlook reflects our opinion that there is a one-in-three chance 
that we could raise the ratings within our two-year outlook horizon. We could 
raise the ratings if key economic indicators continue to improve, available 
reserves (relative to expenditures) are sustained or increase, and the city is 
able to absorb what we expect will be rising debt and pension carrying charges 
without an adverse effect on budgetary performance. Moreover, to a lesser 
degree, eliminating the variable-rate debt with land sale proceeds could 
enhance our view of the city's overall debt profile. We could revise the 
outlook back to stable if the city's recent positive assessed value and 
corresponding tax revenue trends reverse, which could weaken financial 
performance and budgetary flexibility.

Proceeds of the series 2019A bonds will be used to finance a portion of a new 
municipal court building, and proceeds from the series 2019B bonds will 
finance the construction of an education facility.