With Straight AAAs, Fairfax Retains Edge on Credit
Thursday, February 12, 2009
Amid the dire financial news over the past few months, one bright spot has emerged for Fairfax County: high marks from credit rating companies.
For more than a decade, Fairfax County has had top rankings from the three major rating agencies: Moody's Investor Service, Standard & Poor's and Fitch Ratings. Last month, all three agencies reaffirmed the county's AAA bond ratings despite a projected $650 million shortfall in next year's budget. As of December, only Virginia and six other states, 22 counties and 23 cities across the country had such a distinction, according to county figures.
Good credit helps municipalities borrow money at low interest rates because it signals that they are good at managing money and paying debt. Although jurisdictions must pay the rating agencies to be rated, Fairfax officials estimate that the county has saved more than $396 million since 1978 because of its high credit ratings.
But the ratings also show how much the county stands to lose as it prepares to balance its $3.3 billion budget. The result will figure into the rating agencies' future assessments.
"There's probably never been a time that it was more beneficial to have a triple-A bond rating than it is today," said Bob Lauterberg, managing director of the finance program operated by the Virginia Municipal League and the Virginia Association of Counties. "A lot of investors are demanding the top-quality bonds. Because of the uncertain markets, they want the bonds that have the least risk to them."
So far, Fairfax has not faced the same difficulties as some other governments, which have been unable to borrow because of the frozen credit market. Last month, the county sold about $200 million in general obligation bonds to pay for schools, public safety facilities and parks and transportation projects. The projects were approved by voters in elections from 2004 to 2008.
The county also refinanced about $58 million in bonds at an interest rate of 1.46 percent, the lowest the county has ever received on a refinancing sale, officials said. Nine bidders, a startlingly high number, lined up in hopes of buying the bonds.
"When we got nine bids that day, it just took our breath away," said Deputy County Executive Edward L. Long Jr. "What everyone is telling us is we got such a great rate that day for a lot of reasons, the main one being that Fairfax is considered to have one of the strongest credit ratings."
Another reason for the county's high rating is economic development, officials said. County officials are pursuing a major redevelopment of Tysons Corner, which they hope to transform into the urban heart of Northern Virginia. On Feb. 4, Hilton Hotels announced it would move its headquarters to Tysons.
In addition, Metrorail will expand its service in Fairfax as part of its extension to Dulles International Airport, and the Army is slated to move thousands of jobs to Fort Belvoir.
Fairfax is one of three Northern Virginia jurisdictions with three triple-A ratings, Lauterberg said. The others are Arlington and Loudoun counties. The only other counties in Virginia on that list are Henrico and Chesterfield.
Prince William County has a triple-A bond rating from Fitch but a slightly lower double-A1 from Moody's. Alexandria has two triple-A ratings and has not sought a ranking from Fitch.