Wednesday, November 4, 2015

All 3 Wall Street Agencies Re-Affirm Richmond Bond Ratings, Citing “Stable” Financial Outlook

All three Wall Street bond rating agencies have re-affirmed their rating of general obligation bonds to be issued by the City of Richmond. The re-affirmations follow six bond rating increases the city has received since Mayor Dwight C. Jones took office in 2009.

“We’re gratified to earn this re-affirmation of Richmond’s fundamental financial strength,” said Mayor Jones. “Wall Street looks only at the facts when they review a city’s finances. It’s clear that investors are confident in Richmond’s progress and our future outlook.”

Here are the key points from each agency:

Moody’s: Aa2 rating, Outlook is Stable
“The Aa2 rating incorporates the city’s prominent role in the regional economy and as the state capital of the Commonwealth of Virginia, a tax base that is expected to exhibit long-term stability, satisfactory financial operations characterized by conservative budgeting and an elevated but manageable debt position.”
“The stable outlook reflects the expectation of long-term moderate economic growth and a continued conservative fiscal approach that is expected to support the city’s healthy financial position.”
“Richmond’s financial position is expected to continue to remain healthy over the medium term, bolstered by strengthened fund balance policy and implementation of more conservative budgeting assumptions.”
“Richmond’s satisfactory financial position is supported by a history of conservative budgeting, which we expect to continue in the near term.”

Fitch: AA+ rating, Outlook is Stable 
“City management has implemented prudent financial practices and policies largely yielding positive operating results relative to budget.”
“City finances are well-managed, adhering to conservative policy guidelines.”
“The city’s employment base has increased annually between 2011 and 2014, with growth notably outpacing the state and national rates…The city’s historical trend of population declines appears to have reversed, with population increasing 7% since 2010.”

S&P: AA+ rating, Outlook is Stable
“Very strong management, with ‘strong’ financial policies and practices under our Financial Management Assessment methodology.
“Very strong liquidity, with total government available cash of 33.1% of total governmental fund expenditures and 3.7x governmental debt services, and access to external liquidity we consider exceptional.
“Strong budgetary performance, with balanced operating results in the general fund and a slight operating surplus at the total governmental fund level.”
“The stable outlook…reflects the city’s now strong budgetary performance, very strong fiscal flexibility, and liquidity. The city is guided by very strong management that has implemented, strengthened, and continues to implement strong fiscal policies and practices.”

Mayor Jones, city administrators, and the city’s financial advisors hosted the three bond rating agencies in Richmond in mid-October, in preparation for a scheduled issuance of bonds through competitive sale on November 12. The bonds will be used for school projects, general capital improvement projects throughout the city, and costs related to Stone Brewing’s investment in the Fulton neighborhood. The costs of the Stone project will be covered by the firm’s rent payments for the factory under construction in Richmond’s East End.

David Rose, senior vice president and manager of Public Finance for Davenport & Company, LLC, commented, “These ratings re-affirm Mayor Jones’s approach to managing the City’s finances in a prudent and fiscally responsible manner. These strong ratings will make it easier and cheaper for Richmond to borrow money to invest in the City’s future growth and development.”

In addition to the re-affirmations, the agencies also noted the city’s need to continue funding annual required pension contributions, the need to continue addressing Richmond’s poverty rate, and the need to return to timely financial reporting. The agencies also noted that the possibility of using budget reserves could lead to a lowered bond rating in the future.

Click here to view the letters from all three rating agencies.