AAA Rating for City of Virginia Beach’s Storm Water Bonds

Friday, June 15, 2012

Fitch Ratings in New York affirmed its AAA rating for the City’s storm water utility revenue bonds this week.   According to Fitch’s announcement:  “The system is conservatively managed, consistently demonstrating strong financial performance with exceptional debt service coverage and ample liquidity.”

Virginia Beach's storm water collection system includes a combination of pipes and canals, open ditches, ponds, lakes, and pump stations for storm water management.  The system also contains over 4,500 outfalls to various surface water sources throughout the region. The system serves the entire incorporated city limits of the city, covering approximately 440,000 residents and 130,000 customer accounts in 2011.

“I believe this shows a real commitment from the City Council and City staff to not only manage our storm water programs in a fiscally responsible manner, but a commitment to improving and maintaining high quality standards for the water our residents need,” said Phil Davenport, Interim Director of Public Works.

Storm water fees are independently established by the city and are based on an equivalent residential unit's impervious surface area, resulting in a very stable revenue stream.  In addition, the fees are collected as part of the city's water and sewer bill with a history of strong collections.

“We are particularly pleased with the rating,” said Patti Phillips, Director of Finance for the City.   “It reflects the strong financial management practices of City Council and City leadership.  Taxpayers and ratepayers will certainly benefit from their actions.”

According to Phillips, outstanding debt for the system is very low, and the capital plan, which is driven by storm water quality enhancements and infrastructure rehabilitation, is expected to be funded from internal sources, which will help keep debt ratios low over the long term.

Rate increases were approved by City Council as part of the FY ’12 budget approval after a number of presentations and discussions.  Council members and staff agreed that there was a need to provide greater levels of maintenance for the overall system, as well as additional funding to address water quality improvement issues, such as improving the Lynnhaven River.

The increases will offset the City's decision to discontinue the transfer of millions annually from the Virginia Department of Transportation (VDOT) to reimburse the city for roadway drainage and maintenance activities performed by the system.

Fitch’s report stated that they “expect the system will remain fully self-supporting with implementation of the approved fee increases.”