Chesterfield, Henrico see high bond ratings reaffirmed

In the face of a crippled economy, Chesterfield County has sold more than $90 million in general obligation bonds for capital projects and seen its triple-A bond rating from the nation's top three credit-rating agencies reaffirmed.

Only a handful of local governments get the top grade from the agencies, which can mean lower borrowing costs. The county has had the highest ratings from all three -- Standard & Poor's, Moody's Investors Service and Fitch Ratings -- since 1997.

The news came last week after the county sold the bonds to pay for capital projects. The bonds will fund school, public-safety, park, road, and library projects from the fiscal 2009 plan and recently adopted fiscal 2010 plan.

"Their timing was very good," said David Rose, senior vice president and manager of public finance for Davenport & Co. of Virginia.

"What investors want to see these days is high quality, and Chesterfield is a triple-triple."

Rose said bond traders had been demanding slightly higher interest rates in the weeks before the Chesterfield sale but were feeling more eager to hold municipal debt as Chesterfield came to market.

Each time a locality puts bonds to market, the rating agencies review the government's finances, economics, debt burdens, revenues and projections before drafting a credit report and assigning a new rating.

"This is a pretty high accomplishment given the economics in the region, the state and nationally," said Allan Carmody, the county's budget director, saying there was much interest in the bonds as evidenced by the nine firms that submitted bids."

Chesterfield's bonds sold at an interest rate of 3.65 percent. The sale included a refinancing of $21.4 million in existing debt, which saved $1.1 million in debt service expenses, Carmody said, most of which will be realized over the next five years.

"We believe this is a good time to go to market for bonds. Interest rates are at a relatively low point, and we do not believe that they'll stay there for long," said Midlothian District Supervisor Daniel A. Gecker. "And we're delighted to have our rating reaffirmed. It's a tremendous benefit to the county in that we have access to capital markets that others don't, and it keeps our borrowing cost down, which is a benefit to the citizens."

In April, Moody's Investors Service issued an outlook for local government ratings nationwide, and the result was far from positive. Projecting fundamental credit conditions for the sector over 12 to 18 months, the report said sharply falling property values, contracting consumer spending, job losses and limited credit availability would present problems for localities.

But Chesterfield and Henrico County have beaten the odds.

Henrico, the only other triple-triple locality in the region, also recently saw its status reaffirmed with a May general obligation refinancing that resulted in an interest rate of 2.68 percent. The county sold $33.8 million that day and saw savings of $1.8 million, said finance director John Vithoulkas.

"I don't know that we've ever hit that phenomenal a rate. It was a very opportune time to sell," he said. "You try to time your sale, but it's not a science. You really don't know what the rate is going to be until you actually sell."

Vithoulkas added that "it's a bit of an anomaly to have two triple-A localities right next to one another."

Only 21 of the 3,066 counties in the U.S. have triple-triple ratings.

Contact Wesley P. Hester at (804) 649-6976 or .

Staff writer David Ress contributed to this report.