Fitch Rates Clark County School District, Nevada $500MM GOs 'AA'

SAN FRANCISCO--Fitch Ratings assigns an 'AA' rating to $500 million Clark County School District, Nevada, general obligation (limited tax) building bonds, series 2005C. Fitch also affirms the 'AA' rating on Clark County School District's (the district) $3.2 billion outstanding general obligation bonds. The Rating Outlook is Stable. The bonds are scheduled to sell competitively on Oct. 26, with Nevada State Bank Public Finance acting as the district's financial adviser.

The 'AA' rating is based on the district's large and growing, economic base, strong assessed value growth, moderate debt levels, adequate financial position, and good long-term capital planning and management practices. These factors are offset somewhat by growth-related financial and capital pressures. The rapidly expanding population continues to translate into strong demand for additional school facilities. These capital needs are addressed primarily through voter-approved limited tax general obligation (GO) and limited tax GO revenue bond sales. Although still heavily dependent on the tourism and gaming industries, the district economy continues to diversify.

The district operates the nation's fifth largest school system, serving a fiscal 2005 student population of 280,834, or roughly 72% of all school children in the state. The district population is more than 1.7 million; nearly one million above the 1990 population. Clark County (the county) and district boundaries are coterminous and include the cities of Las Vegas, North Las Vegas, Henderson, Boulder City, and Mesquite. Enrollment growth has averaged 5.5% annually since 1999 and is expected to continue. Labor relations are good, with four-year agreements in place.

Clark County's economy is sound. Although concentrated in tourism and gaming, construction and local service industry jobs continue to expand and diversify the economic base. Considerable construction activity has contributed to healthy assessed value gains. In addition, economically sensitive taxes, including sales taxes, transient room taxes, and real estate transfer taxes, continue to rebound to above pre-Sept. 11 levels. Unemployment levels in the Las Vegas MSA continue to decline, ending September 2005 at an improved 4.2%. County income levels closely match those of the state but are slightly above national averages. Double-digit assessed valuation gains continue into fiscal 2006, rising nearly 29.1%, with a six-year average annual increase at 14.4%.

The district's finances remain adequate and improved considerably in fiscal 2004. However, the recently enacted statewide tax levy limitation could inhibit operations and reserve levels. Audited data for 2004 show the general fund ending balance at $108.3 million, a dramatic rise from its $47.1 million level in fiscal 2003. Unaudited data for fiscal 2005 show the fund balance rising by $47.3 million. However, the district intends to spend down its fund balance as it has reserved $29 million for a new district business system to be implemented during fiscal years 2005 and 2006; $11.7 million for future labor contract agreements; and $9.0 million for one-time expenditures. Nonetheless, the ending fiscal 2005 unreserved general fund balance is estimated at $33.1 million, achieving the district's policy of maintaining the fund balance at the 2.0% level.

The 2005C bond proceeds will fund school capital projects under the district's '1998 Capital Improvement Program.' With the approval of its registered voters, the district received an authorization to issue general obligation bonds until June 30, 2008, provided that such bonds can be paid within the existing property tax for school bond debt service of $0.5534 cents per $100 of assessed value.

Debt levels are and should remain moderate, as additional bonds are offset by a rapidly rising population and assessed values, along with rapid amortization of outstanding debt (59% in 10 years). Direct debt level is $2,124 per capita and 2.0% of market value, while overall debt level is 2,320 per capita and 2.2% of market value.

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What are people saying about mortgages today:

Rates on 30-year mortgages edged down last week to a seven-month low. Mortgage-giant Freddie Mac reported Thursday that 30-year, fixed-rate mortgages fell to 6.3 percent, down slightly from 6.31 percent two weeks ago. It put rates at the lowest level since they were at 6.24 percent the first week of March.

Bank of Hawaii, Central Pacific Bank, Territorial Savings Bank and Wells Fargo Home Mortgages all cut their 30-year mortgage rates to 5.75 percent this week.

Most people think of a mortgage as a means to an end. After all, you buy a house, not a home loan. But a mortgage is much more than the path to homeownership. It is a financial instrument that must be managed, just like any other financial investment.