Wall Street has re-affirmed Virginia Beach’s standing as the best-managed city in Hampton Roads. All three major ratings agencies once again have awarded Virginia Beach the highest possible bond rating of Triple-A.
This is the third straight year Virginia Beach has earned this distinction. It is the only city in Hampton Roads with Triple-A bond ratings from all three agencies – Fitch, Moody’s and Standard & Poor’s.
As a result, the city on Wednesday, April 4, raised $65 million by selling general obligation bonds for municipal projects at an extremely low interest rate of just 2.85 percent. This is the lowest interest rate the city has ever received on a large new money general obligation bond issue, beating the 2010 rate of 2.97 percent, which was an all-time low at that time.
The city also refinanced $19.6 million general obligation public improvement bonds, generating a debt service savings of $3.1 million over 14 years. The interest rate on these bonds was 2.41percent.
“We are extremely proud that Wall Street again recognized Virginia Beach as a fiscally strong city with superior financial 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. Seven bids were received. The winning bidder was JP Morgan Securities with an overall interest rate of 2.74 percent for both series of bonds. The second-place bid was from Piper Jaffray, with a true interest cost of 2.78 percent. Ben Asher of Public Resources Advisory Group, the city’s financial advisor, noted that this narrow difference between the first- and second- place bids indicates strong demand for the city’s bonds. The high savings level for the refunding are a result of the city’s highest possible credit ratings, as well as positive conditions in the broader municipal bond market, including very low interest rates and moderate supply.
All three ratings agencies praised Virginia Beach’s conservative fiscal management.
- Fitch praised Virginia Beach’s “superior financial management” and “prudent debt management,” resulting in “moderately low and stable debt levels.” The agency said Virginia Beach’s economy “continues to diversify and has remained relatively stable during the current economic downturn.”
Fitch also favorably noted the possibility of light rail. “A proposed light rail system is under consideration, which Fitch believes could spur transit-oriented development,” Fitch wrote.
- Standard & Poor’s praised Virginia Beach’s “strong local economy,” its “comprehensive economic development strategy,” its “professional and seasoned management team” and its “low-to-moderate debt.” The agency noted that the Virginia Beach Convention Center “has exceeded projections in all areas.”
“Virginia Beach's finances remain what we consider strong, benefiting from, in our view, strong reserves, good liquidity and active financial management,” Standard & Poor’s wrote.
- Moody’s praised Virginia Beach’s “large and diverse tax base stabilized by the presence of military bases,” along with the city’s “strong and carefully managed financial position” and “comprehensive financial policies and conservative budgeting approach.”
“Virginia Beach's debt burden will remain affordable, even with its relatively large capital plan, due to the city's active debt management policies,” Moody’s wrote.
The bonds sold last week will finance roads, buildings, landfill expansion and schools, including the new Kellam High School, currently under construction.
To read the ratings reports from all three Wall Street agencies, visit www.VBgov.com/finance.
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