OREANDA-NEWS. Fitch Ratings affirms the following ratings for Las Vegas, Nevada (the city):

--$205.9 million various limited tax general obligation (LTGO) bonds at 'AA';

--$1.3 million Special Improvement District Nos. 1463, 1470, 1471, 1473, and 1477 local improvement LTGO bonds series 2002 at 'AA';

--$0.4 million Special Improvement District No. 1481 local improvement LTGO bonds series 2004A at 'AA';

--$13.2 million series 2009A and 2009B certificates of participation (COPs) at 'AA-'.

The Rating Outlook is Stable.

SECURITY

The LTGO bonds are general obligations, and the city has pledged its full faith and credit for the payment of the bonds, subject to statutory and constitutional limits on the amount of ad valorem taxes it may levy.

The COPs are secured by lease payments made by the city for the City Hall site and the City Hall building (as well as the Main Street Parking Garage site and building, which was financed with LTGO bonds). The city has covenanted to annually appropriate for the lease payments regardless of use and occupancy of the facilities.

KEY RATING DRIVERS

The city's 'AA' Issuer Default Rating (IDR) reflects its strong operating performance, supported by moderate long-term liabilities and solid expenditure control. The rating is constrained by the city's limited ability to raise revenues, which is somewhat offset by ongoing economic and population growth that contributes to revenue gains.

Economic Resource Base

Las Vegas is Nevada's largest city and economic center. The city has more than 600,000 residents and together with surrounding communities in the Las Vegas Valley includes a population of more than two million. The city's resource base has diversified in recent years but remains concentrated in tourism and gaming.

Revenue Framework: 'bbb' factor assessment

Revenue growth has lagged behind inflation and U. S. economic performance over the past 10 years, and the city's legal ability to increase revenues is limited.

Expenditure Framework: 'aa' factor assessment

The city has a solid ability to manage expenditures. Carrying costs for retiree benefits and debt service are moderate, and management demonstrated an ability to make deep budget cuts during the last recession.

Long-Term Liability Burden: 'aa' factor assessment

Overall debt levels and pension liabilities are moderate relative to the city's resource base.

Operating Performance: 'aaa' factor assessment

Reserve levels are strong relative to expected revenue volatility in a moderate economic recession, and budget management has remained conservative during the current economic recovery.

RATING SENSITIVITIES

IDR SENSITIVE TO FINANCIAL PERFORMANCE: The 'AA' IDR could come under downward pressure if the city fails to maintain satisfactory financial flexibility, including reserves sufficient to address periodic economic volatility.

CREDIT PROFILE

Las Vegas has experienced above-average population growth over the past two decades but also recorded intermittent declines during the last recession, reflective of regional economic volatility. While Nevada's gaming and tourism industries are closely associated with the city, many of the largest casinos and hotels in the region are located outside of the city's borders in unincorporated Clark County.

Revenue Framework

The city will continue to be challenged by its reliance on economically sensitive revenues, as well as its limited revenue-raising abilities. Consolidated taxes (sales and excise taxes) accounted for 51 % of general fund revenues in fiscal 2015 and have proven historically volatile. Property taxes provide an additional 18% of general fund revenues, but the city has limited ability to increase these or other revenues.

General fund revenue growth has lagged behind inflation and U. S. economic performance over the past 10 years, reflecting sharp declines during the last recession. A recovering economy has resulted in renewed gains for the city's chief revenue streams but Fitch expects overall revenue growth to be roughly in line with inflation.

Consolidated taxes, the city's chief revenue source, are controlled by the state. The city is also limited from capturing the full benefit of recent assessed value growth due to state property tax abatement laws. City fee increases generated $7 million in fiscal 2015 but such revenues represent a small portion of total general fund revenues.

Expenditure Framework

The city provides a broad range of municipal services with public safety accounting for 75% of general fund expenditures. Firefighters are employed directly by the city while police services are managed jointly with Clark County.

Based on the city's current spending profile, Fitch expects that expenditure growth will be in line with to moderately above revenue growth, which has lagged behind inflation in recent years.

The city's ability to control expenditure growth is constrained by its high share of costs for public safety and residents' demand for such services. In addition, the city's shared management of police services limits its direct control of expenditures. However, the city negotiated substantial concessions from labor during the last recession and was successful in limiting expenditure increases for police services. Fitch expects the city would return to such strategies in the event of renewed revenue shortfalls.

Long-Term Liability Burden

Most long-term debt is issued with a general obligation pledge as well as a pledge of consolidated taxes. The city participates in a state pension with a somewhat weak Fitch-estimated funded ratio of 69%. In addition, the city bears a portion of the pension liability for jointly managed police services. Total pension liabilities, in combination with overall debt, represent a moderate burden on the city's resource base, at just under 20% of personal income.

Operating Performance

Fitch expects that the city's reserve levels would be sufficient to withstand revenue losses associated with a moderate economic recession, absent other policy actions. Available fund balances include $91 million of unrestricted general fund balance and an additional $24 million from internal service fund balances in excess of policy goals and capital improvement funds not under contract.

Budgeting practices are conservative. The city added to reserves during the last recession and utilized such savings to fund capital needs as economic conditions improved.