State bond rating holding up despite economic troubles and tax war | NevadaAppeal.com
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State bond rating holding up despite economic troubles and tax war

by Geoff Dornan, Appeal Capitol Bureau

While financial troubles have done serious damage to bond ratings in some states, Treasurer Brian Krolicki said Thursday it looks like Nevada will avoid a drop in its AA rating.

“We’ve been in serious and extensive discussions with all the ratings agencies,” he told the governor and other members of the finance board Thursday. “We were grilled.”

He said one of the big issues for Moody’s, Fitch and Standard & Poor’s was the loss of Nevada’s rainy-day fund, which lawmakers decided not to replace.

“They realized we don’t have a rainy-day fund anymore and any reserves that were part of the system have been squeezed out,” he said. “They loved that rainy-day fund.”

But by Thursday, Krolicki said, all three had decided to keep Nevada’s rating the same.

“They know we have a very conservative financial approach and they feel management would respond quickly to any shortfall,” he said.

The S&P report on Nevada described it’s financial situation as “stressed but manageable.”

The bond rating is a key factor in determining what level of interest rates the state can get on its bonds. The higher the rating, the better risk the bonds are considered on the market — which means the state can pay a lower interest rate than other states with poorer ratings.

Krolicki said the state is in the process of preparing several hundred million dollars worth of bonds for sale and that a drop in the rating could cost the state millions over the 20-30 year life of those bonds.

“I’m very pleased,” Krolicki said.

The news was especially good in view of troubles other states have had in the past year. Several states including California have had their ratings lowered because of budget deficits, economic instability and political battles.

Krolicki said Nevada’s contentious legislative session also raised concerns with the rating agencies as lawmakers struggled through the regular session and two special sessions before reaching agreement on a tax package.

“I’m certain these people watched what was going on and our rating, I think, came under a more extreme review because of what happened,” he said.