The City of Virginia Beach today saved taxpayers nearly $2 million by refinancing bonds at extremely low interest rates. The outstanding bond ratings of the Virginia Beach Development Authority helped make this possible.
Virginia Beach refinanced $20.32 million in public facility revenue bonds at 2.431 percent. Previously, the bonds held interest rates of 4.032 percent. As a result, taxpayers will save $1.898 million over the 11-year life of the bonds.
The city today also sold $44.975 million in new public facility revenue bonds at the low rate of 2.981 percent. The money raised from these bonds will be used to fund various city and school projects, such as replacing the Bow Creek Recreation Center, consolidating the Old Donation Center and the Kemps Landing Magnet schools, and building the new parking garage at Town Center, among other projects.
Two factors led to the city’s savings. First, bond rates nationwide are very low. Second, Virginia Beach’s bond ratings are among the best in the country. Virginia Beach is the only city in Hampton Roads with AAA ratings from all three major rating agencies for its general obligation bonds. The bonds sold today were from the Virginia Beach Development Authority, and they were very highly rated at AA+ (Standard & Poor’s), AA (Fitch) and Aa2 (Moody’s). These ratings are lower than the city’s general obligation bonds because they do not carry the city’s full faith and credit pledge, but they are equal to or better than the general obligation ratings of most other Hampton Roads cities.
“The high demand for Virginia Beach’s bonds illustrates the confidence Wall Street places in Virginia Beach,” said city Finance Director Patricia A. Phillips. “We work hard to keep our taxes low and our debt modest. Today we are reaping the rewards of these conservative fiscal practices.”
Bidding for Virginia Beach’s bonds was extremely competitive. Seven bids were received, with the winning bid from Bank of America Merrill Lynch. The narrow difference of only 2.3 basis points between the winning bid and the second-place bid by Morgan Stanley & Co. reflects the strong demand for Virginia Beach’s bonds.
All three rating agencies praised Virginia Beach’s outstanding fiscal policies:
· Fitch noted Virginia Beach’s “exceptional financial management” and “moderate debt.”
“Management’s conservative budgeting practices, maintenance of very sound reserves within policy levels and detailed financial monitoring and forecasting reinforce the city of Virginia Beach’s strong financial flexibility.” Fitch wrote.
- Moody’s noted Virginia Beach’s “large and diverse tax base” and “conservative management practices.”
“Ongoing economic growth and diversification initiatives have attracted a broad range of manufacturing, industrial, retail and service establishments to the area historically anchored on the military, commerce and tourism industries,” Moody’s wrote.
· Standard and Poor’s praised Virginia Beach’s “very strong economy” and “very strong budget flexibility.”
S&P noted the city’s “strong debt and contingent liabilities position, mostly due to the city's low net direct debt.”
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