SAN FRANCISCO - Nevada is preparing to bring more than $300 million in general obligation bonds to the market next month.
Tentative plans call for five series of limited-tax GO bonds, the largest being the $282 million Series 2008C.
Bond plans and the timing of the sale have been driven, in part, by the ongoing budget crisis that prompted Gov. Jim Gibbons to call a special session of the Legislature that meets this morning.
That coincides with a long-planned meeting of the State Board of Finance, the body that gives final approval to state bond sales. Gibbons is one of the members, and he has indicated that the commencement of the special session will not interfere with the board's meeting, said Robin Reedy, chief deputy to state Treasurer Kate Marshall.
The bonds will finance projects that have already been approved as part of Nevada's capital improvement plan, but the composition of those projects has been altered because of the state's budget squeeze, according to Reedy.
"They are moving things around and using more bond money and less general fund money," she said.
The public works subcommittee of the Legislature's Interim Finance Committee met Wednesday to implement those changes in time for the full Interim Finance Committee to approve them yesterday, in time for today's Board of Finance meeting.
To help the state with its budget problems, the Nevada Public Works Board has deferred construction of a long list of projects that had previously been ticketed for bond financing. That will allow the state to program $115 million in bond funds toward other capital improvement projects that were to have been paid for from the general fund, Evan Dale, deputy manager of the Public Works Board, told the public works subcommittee Wednesday.
The treasurer's office plans to price the bonds July 16 and 17, with the larger piece going on the 17th, Reedy said. The sales will be conducted by competitive bid.
"We very rarely do negotiated," she said.
NSB Public Finance and JNA Consulting Group LLC are serving as the state's financial advisers; Swendseid & Stern is bond counsel.
Nevada limited-tax GOs are direct general obligations to which the full faith and credit of the state is pledged. They are backed by ad valorem taxes levied against all taxable property within the state.
The ratings agencies last reviewed Nevada before its previous GO issue in March, when Fitch Ratings revised its outlook to negative from stable on its AA-plus underlying rating. Standard & Poor's rates Nevada GOs AA-plus with a stable outlook. Moody's Investors Service rates them Aa1 with a stable outlook.
When Gibbons called today's special session, he said the input of the full Legislature is needed to help the government adjust to the latest in a long series of disappointing revenue figures.
Opponents of the Republican governor, including the Democratic Assembly Speaker Barbara Buckley, said Gibbons was just trying to deflect attention from his very public divorce proceedings, including revelations that he sent more than 800 text messages from his state-owned cell phone to a woman who is married to someone else.
The state has already enacted more than $900 million in reductions from its 2007-2009 biennium budget through actions by Gibbons and the Legislature's Interim Finance Committee, which has fairly broad discretion to act during the long gaps between regular sessions of the Legislature, which only meets every two years.
Last week, the Economic Forum, a state body created to make budget forecasts, said the budget shortfall had grown by an additional $250 million.
When lawmakers adopted the 2007-2009 biennium budget in 2007, it forecast $6.8 billion in general fund revenue. Current projections are more than 17% lower, at about $5.6 billion.
Not only has Nevada been hard hit by the popping of the residential real estate bubble, but visitor numbers that support its important tourism industry are also beginning to sag. The most recent projection from the Economic Forum is that year-over-year total general fund revenue will decline each year between fiscal 2007 and fiscal 2009.
Plans to structure the special session had not been formalized as of Wednesday, said Lorne Malkiewich, director of the Legislative Counsel Bureau, the nonpartisan organization that provides staff and analytical support for lawmakers.
"The governor has indicated that what he wants is for the Legislature to have a free hand on how to accomplish those reductions," she said.
Gibbons has also publicly reiterated his opposition to any tax increases. He also told a television interviewer that he plans to deliver his own 20- or 21-point plan in a televised address that was scheduled for last night.
Democrats control Nevada's Assembly while Republicans run the Senate. Several lawmakers also face primary challenges in August.
Meetings between the leaders in each chamber were reportedly underway this week in an effort to develop a compromise plan before the start of the session today. One report suggested that lawmakers may ratify some cuts, use their authority to tap the state's rainy-day fund, then adjourn quickly on the assumption that those actions should carry the state's operations through until lawmakers convene for the regular session in February.
Lieut. Gov. Brian Krolicki has made his own proposal to have the state issue bonds securitizing the state's share of the master settlement agreement with tobacco companies.
But that proposal has met with skepticism from Marshall, a Democrat who was elected to replace Krolicki as treasurer in 2006 after the Republican was termed out of office.
"The reservations are mainly based on the concerns that we don't know what assumptions are being made," Marshall's chief of staff, Renee Lequerica, said Tuesday.
When Krolicki was treasurer, he also testified to lawmakers that issuing tobacco bonds to finance a budget deficit would be a "fiduciary failure," Lequerica said.
Krolicki did support ultimately unsuccessful legislation that would have authorized tobacco securitization in order to use the proceeds for health and scholarship programs.
Marshall wants the state's attorney general to sign off on any securitization plan, Lequerica said.
"The policy decision's up to the governor and the Legislature, and she's requested help from the attorney general to make sure there's no violation of fiduciary duty," she said.
