Three-Notch Downgrade for Schools Serving Las Vegas

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LOS ANGELES —Clark County School District, which serves Las Vegas, received a three-notch downgrade to BBB-plus.

Fitch Ratings downgraded the district to BBB-plus from A-plus and assigned a stable outlook affecting $947.9 million in outstanding limited-tax general obligation bonds.

Fitch cited revised criteria published in April placing an enhanced focus on financial resilience in economic downturns, as well as revenue growth prospects and control.

"The district has minimal budget flexibility due to its lack of ability to independently raise revenue and limited ability to cut spending," Fitch analysts wrote in Friday's report.

A pending reorganization of the school district designed to give school precincts greater local control isn't expected to result in significant cost outlays, analysts said.

Nevada Gov. Brian Sandoval signed Assembly Bill 394 into law in 2015, requiring a reorganization of the district by 2018-19. Officials approved a plan in September that accelerates that deadline to August 2017.

Spending is expected to outpace revenue growth as enrollment grows and the district grapples with $8 billion in capital needs from deferred maintenance, analysts wrote. The district expects to issue $160 million of debt in June.

The school district also has modest reserves further contributing to an inability to close any budget gaps despite low historical revenue volatility, analysts wrote.

Clark County serves roughly 320,000 students, nearly three-quarters of Nevada's public school population, making it the nation's fifth-biggest. Boundaries of the mammoth 8,012-square mile school district include Las Vegas, North Las Vegas, Henderson, Boulder City and Mesquite.

The economy was hit hard by the Great Recession and housing values remain below peak, but Fitch said the tourism and sales tax the county relies on are experiencing growth and county employment levels exceed pre-recession peaks.

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