Once again, Wall Street has given Virginia Beach its highest possible endorsement, re-affirming Virginia Beach’s standing as the best-managed city in the region. As a result, the city last week raised $90 million by selling general obligation bonds at an extremely low interest rate.
For the second year in a row, all three major bond rating agencies – Fitch, Moody’s and Standard & Poor’s – rated Virginia Beach’s general obligation bonds as AAA investments. Virginia Beach is the only city in Hampton Roads to enjoy perfect ratings from all three agencies.
On June 22, the city sold $90 million worth of public improvement bonds for major projects at just 3.2124 percent interest. That means Virginia Beach saved about $1.8 million over the 20-year term of the bonds, compared to the interest cost had Virginia Beach been rated AA.
“We are extremely proud that Wall Street again recognized Virginia Beach as a fiscally strong city with conservative management practices,” City Finance Director Patricia A. Phillips said. “Our citizens will reap the benefits of lower costs for major construction projects.”
Bidding for Virginia Beach’s bonds was extremely competitive. Nine bids were received. The winning bid from Citigroup Global Markets was just .0003 percent lower than the second-place bid from JPMorgan. “This narrow difference between the first- and second-place bids indicates strong demand for Virginia Beach’s bonds,” said Ben Asher of Public Resources Advisory Group, the city’s financial adviser. “Citi, the winning bidder, indicated that it is very unusual to have the difference between the winning bid and next-lowest bid be at the fourth decimal place.”
All three ratings agencies praised Virginia Beach’s conservative fiscal management.
Standard & Poor’s noted Virginia Beach’s “strong local economy” that “has proven to be highly resilient through various economic cycles.” The agency praised Virginia Beach’s “comprehensive economic development strategy” and “professional and seasoned management team.” The city’s debt is “moderate” and its tax base is “large and extremely stable and diverse.”
Moody’s listed Virginia Beach’s three main strengths as a “large and diverse tax base stabilized by the presence of military bases,” the city’s “strong and carefully managed financial position” and “comprehensive financial policies and conservative budgeting approach.” The city’s tax base “has demonstrated resilience through the recession” and its debt is “affordable, even with its relatively large capital plan, due to the city’s active debt management policies.”
Fitch praised Virginia Beach’s “prudent debt management policies,” which “have resulted in moderately low and stable debt levels.” The agency also noted the city’s “stable management and conservative planning” and an economy that “continues to diversify.”
The bonds sold last week will finance 10 major capital projects:
- Princess Anne Road-Kempsville Road intersection - $21.2 million
- Great Neck Middle School replacement - $21.1 million
- Kellam High School - $13 million
- Laskin Road Gateway - $9.9 million
- Witchduck Road - $7.7 million
- Pupil Transportation Services maintenance facility - $6.4 million
- Constitution Drive extended - $5.7 million
- Animal Control and K-9 unit replacements - $4.9 million
- Tidewater Community College joint-use library - $4.4 million
- Major bridge rehabilitation - $1.8 million
To read the ratings reports from all three Wall Street agencies, visit www.VBgov.com.finance.
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