Virginia Beach Refinancing Saves Taxpayers $2.6 Million Over 16 Years

Friday, September 25, 2020

VIRGINIA BEACH, VA ­(September 25, 2020) – The City of Virginia Beach has saved taxpayers $2.6 million by refinancing $16.7 million in outstanding Series 2010A-2 (Build America Bonds) and Series 2010B Storm Water Utility Revenue Bonds – loans that funded stormwater rehabilitation, roadway coordination and neighborhood projects. The City's strong credit rating of AAA and Aa1 on its Stormwater Utility system made the savings possible.

On Sep. 1, 2020, the City Council approved a Bond Resolution authorizing the distribution of the Preliminary Official Statement in connection with the issuance of Storm Water Utility Revenue Bonds, Series 2020A and 2020B in the maximum amount of $107.5 million, comprised of up to $90 million for new money and $17.5 million for refunding. On Sept. 23, the City sold a total of $91.5 million comprised of $77.4 million in new money and $14.1 million in refunding Storm Water Utility Revenue Bonds. The refunding resulted in present value debt service savings of $2.6 million over the remaining 16-year term of the refunded bonds, or 15.4% of the refunded bonds.

Seven electronic bids were received from various investment banking, securities brokerage and financial services firms on the Storm Water Utility Revenue and Refunding Revenue Bonds. The bonds were awarded to Wells Fargo Bank, National Association at a true interest cost of 1.945895%.

"Given favorable market conditions and the City's stormwater utility's strong credit ratings of AAA (Fitch) and Aa1 (Moody's), the City sold bonds at the lowest rate ever for City's Storm Water new money and refunding bonds," stated Virginia Beach Director of Finance Alice Kelly. "Maintaining strong credit ratings allows the City to receive the lowest rates, which in turn saves the taxpayers money."

Two major rating agencies affirmed the City's AAA/Aa1 existing rating on its outstanding Storm Water debt and on the 2020A and 2020B Storm Water bonds with stable outlooks, and were highly complimentary of the Stormwater Utility system's financial management strength:

  • Moody's Investors Service – Aa1-stable:  Moody's cites, "The rating reflects the utility's large service area and diverse customer base, healthy debt service coverage, strong liquidity levels, and a manageable debt burden." And "the stable outlook reflects the likelihood that the utility's financial position and debt service coverage will remain healthy due to the stability of the service area, management's conservative budgeting practices, and consistent annual rate increases."
  • Fitch Ratings – AAA-stable: Fitch states that the rating reflects the system's "very low financial leverage in the context of its strong revenue defensibility and low operating risk profile," as well as lack of material impairment from the coronavirus crisis. Fitch outlines various strengths of the Storm Water Utility system including: "strong financial performance driven by steady rate increases and reductions in net debt resulting from solid cash reserves"; "strong revenue-raising ability given its broad, diverse and mostly residential tax base… as well as very strong rate flexibility"; and "low operating cost burden and moderate lifecycle investment needs."