Nevada's economic strength leads to rating upgrade

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Nevada received an upgrade to Aa1 from Aa2 from Moody’s Investors Service Tuesday ahead of plans to sell $201.7 million in general obligation bonds

The upgrade affects $1.2 billion in outstanding general obligation bonds. The outlook is stable.

“We are excited about it,” said Treasurer Zach Conine. “I think it’s a fantastic visual representation, a third party confirmation, of the good work Gov. Steve Sisolak, myself and the Legislature have been doing.”

Sisolak and Conine were both elected in November 2018. Sisolak is the first Democrat elected governor since 1994.

The state has an AA-plus rating with a stable outlook from Fitch Ratings and AA rating with a positive outlook from S&P Global Ratings.

Conine said the treasurer's office usually conducts a large general obligation sale in November or December after the legislature approves its two-year budget in June.

The competitive deal will be sold Nov. 19, according to the treasurer's bond calendar.

It will come in five tranches: $154.7 million of GO limited tax capital improvement and refunding bonds, Series 2019A; $5.2 million GO limited tax natural resources bonds, Series 2019B; $5.8 million GO limited tax safe drinking water revolving fund matching bonds Series 2019C; $6 million GO limited tax water pollution control revolving fund matching bonds, Series 2019D; and $30 million GO limited tax water pollution control revolving fund leveraged bonds, Series 2019E.

The state will release preliminary offering documents within the next several days, said Conine, who would not comment on anything else related to the bond sale ahead of release of the bond documents.

Moody’s cited the strength of the state’s economy, its robust employment and population growth and an increase in rainy day reserves.

The state expects to have $394 million in its rainy day fund by year-end, Conine said.

The upgrade also incorporates the state's “moderate debt and pension burden and favorable demographic trends, balanced by economic concentration in the gaming and tourism industry and a volatile revenue structure that is mitigated by strong governance practices,” according to Moody’s.

Proceeds from the Series 2019 A and B GO bonds will finance statewide capital improvement projects, the construction of a new Department of Motor Vehicles Service Center and a new engineering building at the University of Nevada, Reno, environmental programs and the refunding of certain outstanding GO bonds for savings. Proceeds from the remaining three GO bond series will provide matching and leveraged funds for the state's safe drinking water revolving fund program and water pollution control revolving fund program.

Moody’s also upgraded to Aa2 from Aa3 the state’s $78 million of outstanding lease revenue certificates of participation and affirmed the Aa2 rating on the state's approximately $745 million of outstanding highway revenue bonds.

The one-notch distinction in the rating from the state's GO rating on the lease revenue COPs “incorporates the essential nature of the government facility projects financed by the COPs and the moderately strong legal structure, including the risk of non-appropriation,” according to Moody’s.

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