City of Alexandria Earns Low Interest Rates on Bonds After AAA Ratings are Reaffirmed
Investments Add Resources for Public Infrastructure and Affordable Housing
For Immediate Release: July 28, 2015
After both major rating agencies reaffirmed the City of Alexandria’s top bond ratings, the City earned very favorable interest rates on the competitive sale of new bonds and the refinancing of existing bonds.
“The reaffirmation of our AAA ratings is a reflection of the strong fiscal policies set forth by City Council and upheld by City staff,” said Mayor William D. Euille, who was part of the delegation that made recent presentations to the bond rating agencies. “The economic strength of our community, the development opportunities approved and underway in our commercial sector, and our vibrant tourism industry, all combine to present a very attractive opportunity for investors.”
On July 22, the City issued approximately $23 million in general obligation bonds, will be used for schools, parks, Metro and other transportation improvements and infrastructure, and public buildings. The bonds sold at a true interest cost of 2.7513%, which is one of the lowest the City has earned in recent years. “True interest cost” represents the total cost of the debt, and includes interest payments, fees, and other components. The savings over a higher interest rate is realized over the life of the debt and can be used to fund other programs and services.
The City also refinanced approximately $10 million of taxable bonds that had previously been issued for affordable housing initiatives. The new true interest cost of 2.511% will provide a net present value savings of $1.255 million over the next 13 years, which will be used to fund additional affordable housing opportunities.
The low interest rates and subsequent savings are the result of the City’s “AAA” and “Aaa” credit ratings from Standard and Poor’s (S&P) and Moody’s Investors Service, respectively, which were reaffirmed earlier in July. The City has maintained these top grades from both major bond rating agencies since 1992. The higher the rating, the lower the interest rate requjred by investors.
S&P and Moody’s both called the City’s financial outlook “stable.” Moody’s cited Alexandria’s “dynamic tax base with above average wealth levels and a satisfactory financial position that is expected to improve in Fiscal Year 2015,” reflecting the expectation that “the City’s satisfactory financial position will be maintained due to proactive management, sound financial policies and continued tax base growth and diversification.” S&P called the City’s management practices “strong, well-embedded and likely sustainable.”