Nevada plans to sell $504.8 million in general obligation bonds next week.
In one deal, the state will surpass the GO issuance of any previous year in the past five years, according to Refinitiv data.
Since 2017, the state has sold $1.2 billion in total GO debt, according to Refinitiv.
The state is issuing more GO debt this year because it's well positioned to tap the bond markets, Nevada State Treasurer Zach Conine said.
The treasurer cited the state's efforts to strengthen finances, a
"Having a healthy rainy day fund is one of the best ways to allow our state to respond to economic downturns while still being able to provide vital public services," Conine said.
Nevada has AA-plus ratings from S&P Global Ratings and Fitch Ratings and Aa1 from Moody's Investors Service. The rating agencies all assign stable outlooks. All three revised the outlook to negative in 2020 as the convention and tourism-dependent state
Bidding on the GO bonds, to be sold in four series, the largest a $455.5 million Series 2023A, is scheduled Wednesday,
The GO bonds will finance capital improvement projects, finance the costs of environmental improvement projects for the Lake Tahoe Basin, finance state parks and Nevada Department of Wildlife projects, and provide state matching funds for the state's Safe Drinking Water Revolving Fund program.
"We are also making unprecedented spending on K-12, which we sometimes finance and sometimes pay with cash," Conine said. "We are using this opportunity to make investments that we think will pay off going forward."
The state plans to purchase office buildings to house state employees and expand its footprint, something Conine said the state hasn't done since the early 2000s.
"We have a fair amount of employees in leased office space, plus we have needed to expand the footprint for years, because we hadn't previously been able to," he said.
"We will use some of the bond proceeds to buy buildings, which will decrease operating expenses compared to leasing," Conine said.
"This gives us an opportunity to catch up," he said, adding that most of the Series A GOs are going for that. The $43 million in Series 2023C and 2023D will be spent primarily on projects in the Lake Tahoe region, which Conine said has seen a lot of growth and heavy visitor use in recent years. The GOs are rounded out with the $6 million Series 2023D safe drinking water revolving fund matching bonds.
The work in Lake Tahoe is an environmental improvement project in its fourth year that Nevada has been working on in conjunction with California and the federal government, Conine said. Lake Tahoe, an inland freshwater lake in the Sierra Nevada Mountains that straddles the border of California and Nevada, is known for its beaches, ski resorts and hiking trails.
The Tahoe projects include building new facilities as well as clean-up and maintenance of existing facilities, he said.
"We are getting a 100% match from the federal government on everything we are doing there, so it's great from the state's perspective," Conine said.
Nevada has never sold GO debt in a negotiated deal for as far back as Conine can remember. He said there isn't anything barring the state from pricing debt in a negotiated deal, it just has not.
"I am generally a fan of the market," Conine said.
"I know some states like Texas have been seeing fewer bidders on their debt, but Nevada has always done well selling competitively," he said.
"We are always open to new ideas and options," Conine said.
"We have sold debt using private placements for the deployment of private activity bonds, more so than competitive," he said.
The state is also exploring selling bonds directly to Nevadans so they have the opportunity to invest in the state's debt, and he thinks pricing the debt through a negotiated sale might be a better way to accomplish that.
The state had recovered by mid-to-late 2021 from the down-in the-doldrums days of the pandemic, when it's conference and tourism business took a steep dive, resulting in negative ratings outlooks.
Fitch
This year, it also had
Conine is fond of saying the state likes beating records and hitting the ball off the cover when it comes to ratings and reserves, but one record he's not happy with is the extra late delivery of its audited comprehensive financial report, which is nearly 400 days late.
The ACFR is State Controller Andy Matthews' purview, and Conine said the document has been handed over to the state auditor who is reviewing it. He doesn't know if the ACFR for fiscal 2022 will be out before the state sells its bonds though.
"It doesn't feel like it's a chronic issue with Nevada yet," said Karen Krop, a Fitch Ratings senior director and primary analyst for the state. "We felt like we had sufficient information to do a reasonable investigation."
They are also not the only ones who are late, Krop said.
Both Arizona and California are late on their ACFRs this year, said Richard Ciccarone, president emeritus of Merritt Research Services, an Investortools company, who
Information provided in the ACFRs can bring fiscal distress to light sooner, rather than later, Ciccarone said.
Nevada produced its fiscal 2021 ACFR in June 2022.
"They have been increasingly late," Ciccarone said. "In 2019, it was 215 days late, 325 days late in 2020, 345 days late in 2021, and this year it's already more than 400 days late; only unaudited financial documents have been provided for fiscal year 2022."
California has been producing the ACFR increasingly later since it launched its FI$CAL system, an electronic filing system.
"I am wondering if California is setting a bad standard out there, because its late ACFR has not hurt its pricing, nor has it affected its ratings," Ciccarone said.
The rating agencies usually highlight late ACFRs as a concern in rating reports.
"It is significant to have them," Krop said. "Though with the states, we are getting monthly reporting and budgetary reporting, so we feel comfortable when the audit is produced — that information we have been receiving all along will wind up in that."
The audits, however, do have a lot of useful information that "we like to have about liabilities," Krop said. "We tend on finance to use budgetary and revenue information, because it's more forward looking, but we do use the audit's management discussion and liabilities to rate issuers, so we do like to have that in hand."
Nevada's economy has been strong and the state tends to have bond reserves that are several times what is required.
"They levy a property tax that pays for debt service," Krop said. "And they keep a reserve of six months of debt service, but it has typically been more than that, like a years' worth of debt service."
"Their long-term liabilities are low — not the lowest of the states — but they are pretty low," Krop said.
Nevada had also planned $60 million of competitive sales Thursday to refund certificates of participation. Based on market conditions, the deal was canceled, said John Peterson of municipal advisor JNA.
Municipal bond yields
