LOS ANGELES -- Clark County, Nev., plans to accept bids today on $62 million of bonds secured by a double-barreled pledge of the county's general obligation credit and a jet fuel tax that is being used to back debt for the first time.
Today's sale benefits from a new Nevada law, signed by the governor in March, that permits counties to raise local taxes for transportation projects.
Officials in Clark County, which encompasses the city of Las Vegas, supported the law to provide revenue sources for their ambitious master transportation plan, which totals about $2 billion over the next decade. The law allows the county to generate revenues through increased taxes on jet fuel, retail sales, gasoline, hotel-motel rentals, new development, and motor vehicle privileges.
Clark County's master plan calls for assorted street, beltway, and mass transit improvements.
Proceeds from today's sale will fund land acquisition, design, engineering, and other costs for a southern access to McCarran International Airport in Las Vegas. The existing northern access, a Tropicana Avenue offramp off I-15, suffers from congestion problems.
The full faith and credit of the county is pledged to payment of principal and interest on the bonds. The debt is also secured by a first lien on revenues from a tax on jet aviation fuel that is sold, distributed, or used in Clark County.
A one-cent-per-gallon jet fuel tax is already in place, and the county plans to increase the tax by two-cents-a-gallon on July 1. The Clark County Department of Aviation estimates that the three-cent tax will generate $6 million a year, based on current consumption. County officials can increase the tax by another two cents if projected revenues fail to meet debt service, and the general obligation pledge protects bondholders in any event.
Moody's Investors Service yesterday assigned an A1 rating to the bonds, the same rating it assigns to Clark County's other GO debt.
"The ultimate security is the county," and that was a primary factor influencing the rating, noted Karen Krop, a senior analyst at Moody's.
Standard & Poor's Corp. rated the issue A-plus, which the agency said reflects "strong tax-base growth despite the current national economic slowdown, a reliance on the gaming industry and service sector, strong financial position, moderate debt burden, and manageable capital needs."
County officials structured the deal with a double-barreled pledge "mostly to get the interest rate" advantage from the GO security, noted Martin Johnson, an associate vice president of Howarth and Associates, the county's financial adviser.
Market participants speculated that the true interest cost on the deal would slightly exceed 7%, but those estimates are subject to market conditions on Thursday. About five syndicates are expected to compete for the bonds.
Clark County had scheduled the sale for June 18, but it was delayed when officials learned that too many county commissioners planned to be out of town on that date, Mr. Johnson noted.
He stressed that the delay had nothing to do with a June 6 announcement by America West Airlines, in which the airline said it was negotiating short-term payment deferrals with its aircraft providers.
America West carries about 36% of all passengers in and out of McCarran Airport. On June 13, the county provided an addendum to the official statement to describe the situation.
"America West officials have informed the Clark County Department of Aviation that all other obligations will continue to be made as usual," the addendum says, adding that the airline does not anticipate changes in any other operations.
The aviation department "cannot predict the impact, if any, of America West Airline's financial condition on projected pledged revenues," the addendum notes.
Revenue from the jet fuel tax "should stay up" as long as America West maintains its services, Mr. Johnson said, and he noted that the Las Vegas market would likely be attractive to other carriers if America West ever had to reduce its commitment.