Rating Action: Moody’s assigns Aa1 to Las Vegas Valley Water District, NV’s GOLT Water Refunding Bonds, Series 2022B and 2022C; outlook stableGlobal Credit Research – 27 Jan 2022New York, January 27, 2022 — Moody’s Investors Service has assigned Aa1 ratings to Las Vegas Valley Water District, NV’s General Obligation (Limited Tax) (Additionally Secured by Pledged Revenues) Water Refunding Bonds, Series 2022B and General Obligation (Limited Tax) (Additionally Secured by SNWA Pledged Revenues) Water Refunding Bonds, Series 2022C. The bonds will be issued in the expected par amounts of $33.6 million and $259.1 million, respectively. Moody’s maintains a Aa1 issuer rating on the district, as well as Aa1 ratings on the district’s $3.0 billion of outstanding general obligation limited tax (GOLT) bonds. The rating outlook is stable.The issuer rating represents Moody’s assessment of hypothetical general obligation unlimited tax (GOULT) debt, though GOULT bonds are not issued by local governments in Nevada. The GOLT pledge in Nevada is limited by constitutional and statutory limitations on overlapping levy rates for property taxes.RATINGS RATIONALEThe Aa1 issuer rating reflects the district’s large and expanding tax base that is coterminous with nearly all of Clark County (Aa1 stable). Although the coronavirus pandemic significantly affected the tourism and gaming industry that the regional economy depends upon, visitor volume has almost fully recovered, and the effect on water demand and revenue was moderate given the essential nature of the service. The rating incorporates the district’s solid financial profile, including greater than sum-sufficient coverage from net revenue, high but manageable debt levels and very strong liquidity. The district has strong resource planning and an ample water supply despite ongoing drought conditions that resulted in the first ever shortage declaration and ensuing cuts in allocations of Colorado River water to Nevada in 2022.The absence of a rating distinction between the district’s issuer and GOLT ratings reflects the strength of the full faith and credit pledge in Nevada, which Moody’s rates at the same level as the issuer ratings of local governments in the state.RATING OUTLOOKThe rating outlook for the district is stable given the strong cash positions held by the district and by the Southern Nevada Water Authority (Aa1) that provide substantial cushions for the stress stemming from ongoing drought conditions and the pandemic. We expect that management will continue to actively monitor drought conditions, adjusting operations and rates as needed to ensure sufficient water supplies and satisfactory financial performance. These actions will remain critical given the unprecedented shortage declaration that have reduced allocations in 2022 to all of Nevada from the federally managed Colorado River, which is the district’s principal water supply.FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS- Significantly strengthened debt service coverage- Continued growth in the service area and diversification of the local economy- Sustained improvement in operating performance, relative to peersFACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS- Continued or worsening drought conditions- Unwillingness to adopt prudent rate increases to support operations and debt service- Failure to implement a property tax, if needed, to support debt service- Failure to execute capital plan to ensure adequate water supplies- Reduction in economic activity driven by the pandemicLEGAL SECURITYBoth the Series 2022B and 2022C bonds are secured by the district’s full faith and credit pledge, subject to Nevada’s constitutional and statutory limitations on overlapping levy rates for property taxes that are capped at a combined $3.64 per $100 of assessed value.The 2022B bonds are additionally secured by the net pledged revenues of the Las Vegas Valley Water District.The 2022C bonds are additionally secured by the net pledged revenues of the Southern Nevada Water Authority (SNWA).USE OF PROCEEDSThe Series 2022B bonds is a current refunding of the district’s $39.3 million in outstanding Series 2012A bonds. The Series 2022C bonds is a current refunding of the district’s $299.3 million in outstanding Series 2012B bonds. Both refundings will generate net present value savings with no extension in debt service.PROFILEThe Las Vegas Valley Water District is the retail water provider to the City of Las Vegas (Aa2 stable) and almost all the unincorporated portions of Clark County. The Southern Nevada Water Authority is the wholesale water provider to nearly all of Clark County, including the cities of Las Vegas, Henderson, North Las Vegas, and Boulder City.METHODOLOGYThe principal methodology used in these ratings was US Local Government General Obligation Debt published in January 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1260094. 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