Nevada scores improved outlook from Moody's as tourism numbers climb

Nevada's rebounding domestic tourism industry and the infusion of federal COVID-19-related aid led Moody's Investors Service to revise the state's outlook to stable from negative.

Las Vegas welcomed nearly 2.9 million visitors in May, up 11.8% from April, but still down 22% from May 2019, according to the Las Vegas Convention and Visitors Authority.

The tourism industry drives the state's two largest sources of revenue, sales and gaming taxes, which have seen marked improvements, Moody's analysts said. “Additionally, the infusion of substantial federal coronavirus relief aid bolstered the state's already improving liquidity position and will provide a buffer in case of unanticipated economic disruptions over the next year.”

Visitors crowd the Linq Promenade shopping area in Las Vegas as tourism continues to rebound.

The outlook revision applies to the state’s general obligation limited tax bonds and lease revenue certificates of participation.

The state has $982 million of outstanding GO bonds, $74 million of outstanding lease revenue COPs and $805 million of outstanding highway revenue bonds, according to Moody’s.

Moody’s also affirmed the Aa1 rating on the state's GO bonds, the Aa2 rating on the lease revenue COPs and the Aa2 rating on the state's highway revenue bonds, including the motor vehicle fuel tax bonds and indexed tax and subordinate motor vehicle fuel tax bonds.

The rating outlook remains stable for its highway revenue bonds “reflecting healthy debt service coverage provided by pledged revenue despite revenue declines caused by coronavirus-driven economic disruptions,” Moody’s said.

The stable outlook also incorporates the state's ability to respond to revenue declines caused by pandemic-related economic disruptions over the last 16 months through prudent budget management, including reducing expenditures, Moody’s analysts said.

Budget reserves that were completely depleted in May 2020 to cover anticipated budget gaps in fiscal 2020 and 2021 are expected to be restored over the next two years through statutorily required deposits determined by formulas related to forecasted revenue and unappropriated fund balances, Moody’s analysts said.

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