LOS ANGELES — Fitch Ratings has deemed the reorganization of Nevada's largest school district a mid-term credit risk.
The rating agency, however, said it expected there would be no short-term impact on Clark County School District, because several steps must occur before a reorganization takes effect. The district, which educates 320,000 students in and around Las Vegas, has until Jan. 1, 2017 to submit a reorganization plan to the state Board of Education.
The school district has an A rating from Fitch with a stable outlook.
"District reorganization plans might present uncertainties for bondholders - as a 2010 restructuring in Utah did - because the resulting distribution of property taxes, potential limits of future bond issuance, and operating environments of the smaller districts are unknown," Fitch said in the Nov. 6 report.
The Jordan School District in Utah was split in two after voters approved the action in a ballot measure that passed in 2007.
Clark County Superintendent Pat Skorkowsky outlined a proposal to break the district into seven local precincts during a legislative committee meeting held in mid-October. Legislators told the Bond Buyer last week that the superintendent's plan will be considered along with any other proposals.
Under Skorkowsky's proposal, the current district office would retain control of operations.
Under either a true district division or a hybrid scenario, Fitch said it expects outstanding debt to continue to be payable from the current levy that includes the taxable property of the entire school district. However, new entities could emerge, each with a portion of the tax base and with potentially different tax rates, Fitch said.
In Utah, the new district, Canyons School District, to which Fitch assigned a AAA rating for its underlying limited tax general obligation bonds, began operations in fiscal 2010 under a separate school board.
The Utah school districts experienced modest credit uncertainty during the break up, but Fitch analysts said ratings "recognized the strength of each district's operations and the tax base from which the bonds are repaid."
According to Fitch in Utah, bonds issued prior to the breakup continue to be payable from the proceeds of unlimited ad valorem taxes levied on the taxable property of the prior combined district.
"Each district's separate tax levy for the debt is set according to the size of their respective annual debt service repayment," Fitch said. "The resulting revenues are restricted solely for the purpose of repaying those bonds, alleviating bondholders' mid-term risks of the reorganization."
