Fitch Rates Las Vegas, Nevada's $15MM LTGOs 'AA'; Outlook Negative

SAN FRANCISCO--(Business Wire)--
Fitch Ratings assigns an 'AA' rating to the City of Las Vegas, Nevada's (the
city) $15 million limited tax general obligation (LTGO) medium-term bonds (main
street parking garage) series 2009. The bonds are scheduled to sell on Oct. 14,
2009. In addition, Fitch affirms the 'AA' rating on the following outstanding
obligations:

--$381.7 million outstanding parity LTGO bonds;

--$2.9 million Las Vegas Special Improvement District Nos. 1463, 1470, 1471,
1473, and 1477, series 2002;

--$1.5 million Las Vegas Special Improvement District. No. 1481's local
improvement bonds, series 2004A.

The Rating Outlook on all bonds is Negative.

The Negative Outlook, assigned in March, 2009, continues to reflect Fitch's
concern that the duration and severity of the economic downturn in Las Vegas and
its impact on the city's revenues could drain the city's currently very strong
financial reserves to below a level consistent with an 'AA' rating considering
the economic volatility inherent to a tourism-based economy. While reserve
levels remain strong, the city expects them to decline over the medium term as
its consolidated tax (a group of economically sensitive revenues) and property
tax revenues fall. Fitch acknowledges management's significant and ongoing
expenditure reductions made to date, and notes that continued resolve will be
needed to achieve longer-term fiscal balance. A drawdown of the general fund
below the city's 10% of expenditures policy level (temporarily reduced from 12%)
and/or a reduction in the newly established fiscal stabilization fund (FSF) is
likely to trigger a rating downgrade.

The 'AA' rating reflects the city's very strong financial reserves, the result
of prudent operating policies and practices, enduring tourism draw (albeit
vulnerable to cyclicality), and low debt levels, balanced by the severe current
economic contraction precipitated by the decline in the residential real estate
market and worsened by the nationwide recession. The real estate market weakness
resulted in a dramatic 27% assessed value decline for fiscal 2010, with a
smaller loss projected for fiscal 2011. Fitch notes that the revenue impact of
the fiscal 2010 loss was largely offset by the state's property tax abatement
act, which smoothes the year-to-year revenue impact of sizable value increases
and decreases. However, the city expects to exhaust its accumulated abatement of
property taxes in fiscal 2011, resulting in a 5% revenue loss unless the city
council raises the tax rate. The abatement act and other levy restrictions do
not apply to taxes levied to repay the bonds.

The national and global economic downturn has negatively affected the city's
once strong tourism sector and related jobs and tax revenues. To date the city
has responded effectively both mid-year and in its budget, initially by slowing
capital expenditures and eliminating vacant positions, and more recently through
labor agreement concessions and layoffs. The city also established an FSF,
setting aside $50 million available for use while it adjusts ongoing spending to
match ongoing revenues. This reserve, combined with the general fund unreserved
fund balance, equals a high 25% of spending based on unaudited results for
fiscal 2009. The fiscal 2010 budget uses some of the general fund balance,
reducing these combined reserves to a still very good 18% of spending.

The city's five-year financial forecast adheres to the 10% general fund balance
policy, but draws down the FSF to about 6%, which Fitch views as about as low as
these levels can go without threatening the current 'AA' rating level. The plan
is based on implementing an additional 5% in savings for fiscal 2011, and the
economically sensitive consolidated tax returning to moderate growth in fiscal
2012. Fitch views the revenue assumption as slightly optimistic, but also notes
that the city generally outperforms its budgets and forecasts, which are built
assuming 98% of all authorized positions are filled, when typically only 94% are
filled. Continued economic decline beyond the city's current expectations and/or
the inability to regain fiscal balance as planned could result in a rating
downgrade.

Led by dramatic losses in construction, the city's overall economic performance
has changed. Employment gains in the Las Vegas-Paradise metropolitan statistical
area declined 1.4% in 2008 and data for July 2009 show jobs down 6.6% from one
year earlier. Hardest hit was the construction sector, which peaked at 15% of
total employment in 2006 and now makes up a still above-average 10% of all jobs.
All employment sectors except education and health services now are experiencing
losses, with the leisure and hospitality sector down 6.6% in July 2009 from one
year earlier. The city's labor force continued to increase, resulting in a 13.3%
unemployment rate in July 2009 compared to 7.1% a year prior. While a number of
large casino/hotel/resort projects countywide have been cancelled or stalled,
Fitch continues to believe the area will remain a strong global tourist
destination.

The city and area's economic recovery will be hindered by severe dislocation in
the residential real estate market, characterized by continued home-sale price
declines, high foreclosure rates, and a well-above-average exposure to negative
amortization mortgages. Data covering securitized mortgages for 2008's fourth
quarter show 19.8% in foreclosure and 15.1% as negative amortization; in
comparison, nationally these figures are 11.3% and 7.6%, respectively.

While property tax makes up nearly one-quarter of the city's operating revenue,
the consolidated tax, which is collected at the state level and distributed to
cities in the county based on assessed value and population growth, makes up a
sizable 44%-49%. The consolidated tax declined 12% in fiscal 2009 (unaudited)
and is budgeted to fall another 2% in fiscal 2010 before rising 5% in fiscal
2011. All tax revenues are forecasted to return to moderate growth beginning in
fiscal 2012, which is projected to achieve about break-even operations assuming
spending reductions implemented through fiscal 2011 are retained. Fitch will
monitor the city's progress in achieving fiscal balance, with particular
attention paid to reserve levels and the actions taken in response to changing
economic conditions and their revenue impact.

As a result of its regular capital spending, the city's debt burden is very low
at $2,511 per capita and 2.4% of assessed value, including overlapping debt. The
city's above-average debt amortization (56% matures in 10 years) will help keep
the debt burden manageable. The city's other post-employment benefit liability
is estimated at $220 million, and the annual required contribution of $23.5
million is well above current pay-as-you-go costs. The city has begun setting
aside funds for its obligation, although the amount has been reduced in response
to the weak revenue performance.

Additional information is available at 'www.fitchratings.com'.

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Fitch Ratings
Amy Doppelt, +1-415-732-5612 (San Francisco)
Karen A. Ribble, +1-415-732-5611 (San Francisco)
Media Relations:
Cindy Stoller, +1-212-908-0526 (New York)
cindy.stoller@fitchratings.com

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