Just a week away from its planned sale of $126+ million in municipal bonds to finance the construction of a new George Mason High School and the renovation and expansion of Mary Riley Styles Public Library, the City of Falls Church scored yet another top-notch AAA bond rating from Wall Street. For the second consecutive year, the City has earned the highest credit rating from all three major bond rating agencies.
S&P Global Ratings and Fitch Ratings have reaffirmed the City of Falls Church’s AAA bond rating, and Moody’s Investors Service has reaffirmed the AAA rating. The City is preparing to issue a fixed rate, 30-year General Obligation Bond on October 22 for $126,825,000 to fund the high school and library capital projects. It is expected that the bonds will sell at under 3 percent interest, compared to the 4.5 percent the City projected when it sought vote approval for the issuance two years ago. The difference will result in tens of millions in savings for City taxpayers.
“These top ratings are a validation of the sound planning and prudent fiscal policies of this community” said Mayor David Tarter. “These ratings will allow the City to finance the new high school and other capital projects at the lowest possible rates, saving taxpayers millions of dollars,” he added.
“The bond issuance is the largest in the City’s history,” said Kiran Bawa, Chief Financial Officer. “The excellent ratings are the result of long-term planning for strategic growth and investment in capital projects.”
Bond ratings (expressed in letters from “AAA” to “C”), are grades given to bonds that indicate their credit quality. Private independent rating services provide these evaluations of a bond issuer’s financial strength, or its ability to pay a bond’s principal and interest in a timely manner.
In reaffirming the City’s AAA bond rating and “stable outlook,” Fitch cited that the City “maintains the highest gap-closing capacity and fundamental financial flexibility to manage through an economic downturn.”
Moody’s also noted a “stable outlook” with the top rating due to the City’s “diverse and moderately growing tax base with very high wealth levels, stable financial position and reserves, above-average debt burden that will increase given future borrowing plans, and manageable pension liabilities.”
S&P analysis of the “stable outlook” states that the City’s “budgetary performance is strong” with “prudent and proactive budgetary practices” that have “maintained sound financial operations.”
In April 2018, the City earned triple-A ratings from all three agencies. Since then, the City has exceeded projections in all key areas. The high school project is on schedule and on budget. The West Falls Church economic development project final deal value is $44.5 million, more than the projected amount. The City remains financially strong with fund balances above the financial policy thresholds and fully funded retiree medical and pension plans.
To take advantage of the low interest rates, the Council approved issuance of the remainder of the financing required for the high school in one issuance rather than the previously contemplated two issuances. These funds will also be used to refinance the $20 million general obligation note issued in June 2019.