Nevada rating outlook revised upward to stable by Fitch Ratings

Fitch Ratings revised Nevada’s outlook to stable from negative Wednesday and affirmed its AA-plus issuer default rating.

The outlook revision reflects the state’s “stronger than anticipated rebound from the disruption caused by the coronavirus pandemic, both in terms of its revenue performance and its focus on rebuilding financial resilience,” Fitch analysts wrote in Wednesday’s report.

The outlook revision applies to $1.18 billion in GO debt and $72 million in certificate of appreciation debt issued by the Nevada Real Property Corp that was outstanding as of June 30, 2020, said Karen Krop, a Fitch senior director.

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The Las Vegas area's visitor volume was up 11.2% from the previous month to 3.3 million in July, according to figures from the Las Vegas Convention and Visitors Authority. That figure is still down 10.4% when compared to July 2019, though well over double the July 2020 number.

Employment recovery in Nevada has been somewhat slower than average, given the state’s economic concentration in leisure and hospitality, Fitch analysts wrote, adding that the state is taking advantage of the economic recovery and the rebound in state revenues to rebuild its financial resilience, including by rebuilding the rainy day fund.

The state’s unemployment rate fell to 7.7% in July, down slightly from 7.8% in June, according to the Department of Employment, Training and Rehabilitation. The state’s jobless rate soared to 16.6% in July 2020.

The state added 4,800 jobs in July and has recovered about 68% of jobs lost during the recession. It has rebounded to within 92% of the pre-recession peak, according to the department’s monthly jobless report.

Significant federal pandemic-recovery relief funds provide a cushion to bridge potential unevenness in the economic recovery, Fitch wrote.

The state’s conservative liability position, strong revenue and expenditure frameworks, and historically responsive financial practices, as well as its success in managing rapid population growth and development were cited for its AA-plus rating.

The lease revenue certificates of participation are rated one notch below the state IDR to reflect the appropriation risk.

Nevada’s general obligation bonds have a full faith and credit pledge from the state. Debt service is supported by a statewide property tax levy that is subject to both constitutional and statutory limitations. If revenues are not sufficient to pay GO debt service, money is borrowed from the general fund and repaid from future property tax revenues.

Nevada is rated AA-plus by S&P Global Ratings and Aa1 by Moody's Investors Service.