WASHINGTON — Fairfax, Va., yesterday was upgraded one notch to AAA by Standard & Poor’s because the city’s economic base has remained strong throughout the recession.
The city has $178.7 million of tax-supported debt outstanding and expects to issue $37.4 million of general obligation refunding bonds as early as next week to refinance GOs from 2002, 2004m and 2005. Fairfax will not issue the refunding bonds unless it can achieve 3.0% savings, said David Hodgkins, the assistant city manager and director of finance for Fairfax.
The rating reflects the city’s affluent suburban community with a local economy tied to federal government work, according to Standard & Poor’s. Median household effective buying income is 157% of the national average, while market value, an indicator of property wealth, is $262,212 per capita. This property wealth supports a tax base that “has experienced substantial growth,” rating agency said.
Fairfax has managed its budget well amid the recession. It posted general fund operating surpluses for eight consecutive fiscal years ending in 2008. Fairfax drew down its reserves in fiscal 2009 by about $1.5 million, but they are still considered strong by Standard & Poor’s.
“We believe officials will sustain the city’s strong financial performance and position and manageable debt burden, evidenced, in part, by continued healthy general fund reserves,” said Jesse Brady, lead analyst on the rating. “The absence of tax-supported debt in the city’s current five-year capital plan further supports our expectation that the city’s financial and debt profiles will remain favorable.”
Hodgkins welcomed the upgrade. He said the savings, especially for larger issuances, could be significant with the new rating. Moody’s Investors Service, which currently rates Fairfax Aa1, is expected to announce a rating for the refunding deal as early as today, Hodgkins said.
The upgrade further cements northern Virginia as a hotbed for high-quality issuers. Fairfax, Loudoun and Arlington counties carry triple-A ratings. The town of Leesburg in Loudoun County was upgraded to AA-plus by Standard & Poor’s in September.
Fairfax has issued debt to renovate its public schools, for downtown development, and for the utilities it owns, according to Hodgkins. The city does not plan to submit an application for qualified school construction bonds because its four schools were all recently renovated, he said. Virginia will accept applications from localities for QSCB projects through Nov. 11.
