Ahead of a negotiated $16.6 million general obligation bond sale set for Oct. 28, Suffolk received a AA-minus from Fitch Ratings and an outlook boost to positive from stable.
Fitch affirmed the same rating and outlook on the city’s $202 million of outstanding GOs.
“The AA-minus rating reflects the city of Suffolk’s adequate reserves, regionally competitive tax rate, and moderate debt levels,” analysts wrote. “The rating also incorporates an economy that is diversifying and growing but centered on a large government and military presence.”
The revised outlook comes as Suffolk has improved its financial practices. The city has increased its reserves, strengthened general fund liquidity, and eliminated accumulated deficits in its internal service funds and debt service fund, the rating report said.
“The resulting financial flexibility should allow the city to address its significant growth-related capital needs,” Fitch said.
Located in the western part of the Hampton Roads region of southeastern Virginia, Suffolk is the largest city by area in the state and one of the fastest growing, Fitch noted. The city’s economic and demographic characteristics continue to improve, primarily due to its available and relatively inexpensive land, significant road network improvements, and modest tax burden, with a rising population to an estimated 81,332 in 2007, up more than 27% from the 2000 census figure. The population is projected to double over the next 25 years.
Suffolk ended the fiscal year with a “solid” cash position in the general as well as consolidated funds and maintained balanced internal service funds, according to Fitch.
The city’s five-year capital improvement plan totals $435 million and more than 50% of the plan is attributable to public utility projects, which will be funded by utility revenue and bonds, and GOs will comprise the next largest funding source at 29%. The city plans to increase its pay-as-you-go financing within the next few years to equal 3% of general fund expenditures.
Moody’s Investors Service rates the deal Aa3. Standard & Poor’s has not yet rated it.
