Fitch Ratings downgraded $4.7 billion of Clark County School District general obligation limited-tax bonds to AA and revised the outlook for the district to stable from negative.

The district operates the fifth largest school system in the country, serving more than 300,000 students. But it has seen a reversal in its previously high new enrollment growth. The district includes the cities of Las Vegas, North Las Vegas, Henderson, Boulder City, and Mesquite.

The district is coterminus with Clark County, which has been hit hard by the recession  resulting in job losses, declines in property values and high home foreclosure rates.

Fitch also assigned a AA to $104 million GO limited tax school bonds  Series 2010A and $6.2 million GO limited-tax bonds, Series 2010D. The bonds are expected to sell via negotiation on June 17. Both tranches are classified as taxable direct pay qualified school construction bonds.

The rating agency said the downgrade resulted from  deterioration of financial flexibility due to a reduced fund balance. It is also based on the expectation that economic recovery will not occur in the near term and that will inhibit the district’s ability to replenish reserves.

The declines in property tax receipts and debt capacity due to assessed valuation losses and the downturn in the tourism economy have resulted in decreased revenues. But the districthas a history of adhering to strong financial practices and forecasting while maintaining thin but adequate reserves. Though debt levels are moderate the district’s capital needs are large.

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