SAN FRANCISCO (S&P Global Ratings) May 29, 2018–S&P Global Ratings lowered its long-term rating and underlying rating (SPUR) to ‘A+’ from ‘AA-‘ on Clark County School District, Nev.’s outstanding general obligation (GO) bonds. In addition, S&P Global Ratings assigned its ‘A+’ long-term rating to the district’s series 2018A limited-tax GO building bonds. The outlook for all ratings is negative.
"The lowered rating and negative outlook reflect our view of the district’s recent budgetary challenges stemming from its ongoing and contentious collective bargaining environment, declining expenditure flexibility, and very thin reserves that violate the previous reserve policy," said S&P Global Ratings credit analyst Jenny Poree. "While management has implemented budgetary actions to address its revenue shortfalls, we believe that the district’s labor agreements are unsustainable and will continue to pressure operational performance," Ms. Poree added.
Further pressuring the rating is the recent arbitration decision from the Clark County Education Association (CCEA), which builds in unsustainable cost increases and requires further potential use of the district’s reserves. The district has filed a motion to vacate the arbitration decision on the assertion that the decision disregards the governing law. In our opinion, the arbitration decision calls into question our previously held assumptions that a portion of the district’s fund balance is protected from arbitration; if this assumption proves false, it could make all Nevada school districts’ reserves more vulnerable to arbitration.
The district expects to issue $37 million in medium-term bonds in November 2018. Further, the 2015 capital plan suggests annual issuances through 2025.
Clark County School District serves an estimated population of 2.2 million. The district boundaries include unincorporated areas of the county, as well as Las Vegas, North Las Vegas, Henderson, Boulder City, and Mesquite. It is the largest district in the state and one of the largest in the nation, with an estimated average daily attendance of 322,901 in fiscal 2019.
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