Virginia Bond Sales Could Save State $46 Million in Debt Service Payments

Top bond rating agencies reaffirm coveted Triple-A rating for Virginia

Governor Timothy M. Kaine today highlighted a number of bond sales anticipated to save Virginia $46 million in debt service payments. The announcement comes on the heels of the recent reaffirmation by the nation’s top bond rating agencies of the Commonwealth’s triple-A general obligation bond rating.

Virginia is one of only 7 states nationwide to hold the Moody’s, Standard and Poor’s, and Fitch Triple-A rating, the highest rating category offered by each firm.

“The reaffirmation of our Triple-A bond rating during these challenging times for the economy is the latest evidence of Virginia’s exceptional fiscal management,” Governor Kaine said. “By taking advantage of low rates and incorporating the ‘Build America Bonds’ created by the American Recovery and Reinvestment Act, these bond sales offer significant savings that will benefit Virginians for years to come.”

With municipal bond prices hovering near 42 year lows in recent weeks, Virginia has been able to borrow money for critical projects at very low interest rates and take advantage of a new bond program established under the American Recovery and Reinvestment Act. In addition, certain outstanding bonds were refinanced at lower interest rates, saving $46.2 million in debt service payments:

• The Virginia College Building Authority (VCBA) issued $261 million in bonds on October 8, 2009. The bonds included $52 million to finance the acquisition of equipment at Virginia’s public institutions of higher education. The remaining $209 million refinanced certain outstanding VCBA bonds, resulting in debt service savings of $ 8.9 million.

• Virginia Public School Authority sold $481 million in bonds to refinance certain outstanding obligations on September 29, 2009, resulting in savings of $28.7 million. The savings will be returned to the 28 localities that participated in the original bond issues and the Literary Fund.

• The Treasury Board issued $332 million in General Obligation Bonds for capital projects at institutions of higher education, a parking facility in Richmond, and to refinance certain outstanding bonds on October 21, 2009. These bonds included $24 million in Build America Bonds that will complete the issuance of General Obligation bonds approved by voters in 2002 for educational institutions and park and recreational facilities. Build America Bonds are a special category of bonds created under the American Recovery and Reinvestment Act. The refinancing portion of the issue, which totaled $168 million, generated debt service savings of $8.6 million.

• This week, the Commonwealth Transportation Board sold $72.2 million in Northern Virginia Transportation District Program bonds to provide funding for construction of additional phases of the Fairfax County Parkway, Route 50/Courthouse Road Interchange in Arlington County, and Metrorail Capital Improvements in the city of Fairfax. Of that amount, $61 million was issued as Build America Bonds.

In reaffirming the Commonwealth’s Triple-A general obligation bond rating in September and October, the nation’s three top bond rating agencies – Moody’s, Standard and Poor’s, and Fitch issued comments lauding Virginia’s fiscal management approach:

From Moody’s: “The rating reflects Virginia’s long history of proactive and conservative fiscal practices, an economy that has slowed significantly but still fares better than the nation, the significant fiscal challenges the commonwealth continues to face amid weakened revenues, and a strongly-managed debt structure. … Although hard hit first by the housing downturn and then the broader economic decline, the fundamentals of Virginia’s economy remain sound and its recovery will be above-average compared to other states.”

From Standard & Poor’s: “The rating reflects our view of the commonwealth’s: Strong and broad-based economy that in the past decade has grown at a faster pace than the national average; Good financial position with sufficient reserves; Long history of proactive and conservative financial management; and Manageable debt burden. The commonwealth’s strong financial management focus is evident in its early and active response to a softening of revenues to alleviate a projected $5.6 billion budget deficit for the remainder of the fiscal 2008-2010 biennium.”

From Fitch: “The commonwealth’s ‘AAA’ rating reflects its substantial economic resources, conservative approach to financial operations, which include periodic revenue forecast updates, and careful attention to the level of its debt obligations.”

Topics: American Recovery and Reinvestment Act, bond ratings, Build Americas Bonds, Commonwealth Transportation Board, debt, economic recovery, Economy, fiscal management, Fitch Triple A rating, Governance, low rates, Moody, Standard and Poor, The Treasury Board, Triple A, Virginai College Building Authority, Virginia, Virginia Public School Authority

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