F.C.'s Economic Development Boosts Bond Rating, Leads to $20 Million Savings in School Bond Sale

ON A BRIGHT Saturday morning in the City of Falls Church, a political campaign rally sponsored by the Citizens for a Better City (foreground) on grounds of the future Byron mixed-use development project is loomed over by nearly-completed Broadway across the street. The Broadway, built on a site that stood idle and blighted for more than 11 years, is the first project of its scale to be constructed in the City in decades. The Broadway, Byron and just-approved Spectrum will not only bring millions in up-front proffers and annually in new tax revenues to Falls Church, but they impressed New York bond raters earlier this month resulting in an upgrade of the City's bond rating. That helped the save the City over $20 million in the next 20 years on yesterday's school bond sale. The CBC rally kicked off the campaigns of three City Council and two School Board candidates for the May 4 election in Falls Church. (News-Press photo)

The City of Falls Church received a surprise $20 million gift yesterday for its recent efforts to bring large-scale mixed use development to its downtown corridor.

City Finance Director Shirley Hughes learned yesterday afternoon that the $25 million bond to finance construction of a new middle school approved by voters last fall sold on Wall Street at a phenomenally low interest rate earlier that day.

The new variable rate averages out to 3.562537% over 20 years, coming in far below the 5% rate anticipated when the City made its projections prior to the bond referendum last fall.

According to a calculation by developer Bob Young of the Young Group, the difference between the anticipated rate and yesterday's sale price amounts to a savings to City taxpayers of $20,489,952 over the 20 years.

The remarkably low rate was due not only to continued low rates offered throughout the economy, but specifically in Falls Church's case to a recent upgrading of the City's bond rating.

Anticipating yesterday's sale, Standard and Poor's in New York did a thorough review of the City's bond rating, and decided to upgrade it two notches from A-Plus to Double-A.

Hughes told the News-Press she was "pleasantly surprised" by the upgrade. "I was expecting the worst," she said. But she said the bond raters were particularly impressed by the City's performance in three areas:

• First, the City has formally adopted and adhered to firm and prudent debt management and fund balance reserve policies.

• Second, and even more significant, the City's recent successes in attracting and approving three large, mixed-use development projects on the West Broad Street corridor, along with its plans to development its city center, impressed the bond raters about the City's positive fiscal outlook for the future.

• Third was the overwhelming community support for the school bond. A referendum authorizing the bond sale passed by a three-to-one margin last November.

In addition to the $25 million for the authorized school bonds, because of the low rate, the City decided to also roll in its remaining obligations on the 1993 bonds sold to renovate George Mason High School. Overall, therefore, $32.34 million in City bonds were sold yesterday.

Merrill Lynch bought the entire package. Nine houses indicated an interest, and six actually bid. The last time the City floated bonds, only four houses were interested. This was another reflection of the City's improved bond rating, Hughes said. "It's made us more attractive on Wall Street," she said. "I am very excited."

The three currently-approved mixed use projects – The nearly-completed Broadway, the Byron and the Spectrum – were hailed by City leaders for the significant contribution they will add to the City's tax base once completed. The estimates are a net positive flow of over $2 million a year. In addition, cash and in-kind proffers from the developers also added $4 million to the City.

But the impact of these developments on the City's ability to pay significantly less for its bonds was never anticipated. The added $20.4 million savings achieved yesterday will add further to the City's rosy outlook for its future.