S&P: Reno Special Assessment District No. 2, NV Series 2016 Local Improvement Bonds Rated 'BBB'
"The rating reflects our opinion of the special district's dependence on four casino and hotel properties to pay 70% of assessment payments," said S&P Global Ratings credit analyst Michael Stock. The rating also reflects economic concentration in gaming and resort properties including ownership of several major casino properties by national casino operators such as Circus & Eldorado Joint Venture, Harrah's, and Eldorado Resorts.
In our view, these risks are mitigated by: Good collection rates; and An ability to cover the life of the issue without default of delinquent payments from the single-largest taxpayer and three years from the two largest taxpayers using the debt service reserve. The bonds are secured by unpaid assessments due from roughly 326 parcels in Reno's downtown core. Although the district's special tax is on a per property basis and not dependent on assessed value (AV), we view AV as an indicator of tax base performance. For fiscal 2016, aggregate AV stands at $311 million, which is a 42% decline since fiscal 2010's AV of $537 million, but includes an 11.8% rise in value this past year. Household wealth levels are adequate, at 86% of the national median. Unemployment has been at 6.2% in 2016. The annual payments per parcel are fixed, based on the remaining lien assigned to each parcel, and not based on or subject to change based on the current or future property value.
The stable outlook reflects the economy is beginning to show signs of improving, in our view, as indicated by increasing AV projections, which should continue over the next two years.
Should any large taxpayer enter bankruptcy or discontinue making its special assessment tax payments, we could lower the rating.
Diversification of the taxpayer base with all other credit characteristics remaining the same could potentially lead to an upgrade.