Diamond District bonds help Richmond achieve first AAA credit rating from Fitch

FitchRating1

City administrators, financial advisers and councilmembers joined Mayor Levar Stoney for Thursday’s announcement. (Jonathan Spiers photos)

Changing its approach to financing the Diamond District has helped the City of Richmond achieve its first AAA credit rating, the highest possible, from one of the big three U.S. bond rating agencies.

City officials on Thursday celebrated the upgrade from Fitch Ratings with a news conference and reception in the observation deck atop City Hall.

The upgrade from the city’s previous AA+ rating was announced Wednesday by Fitch, which increased Richmond’s issuer default rating and outstanding general obligation to AAA (vocalized as “Triple A”) as a result of it assigning AAA ratings to two bond series recently issued by the city, including $130 million in general obligation (GO) bonds to finance the new Diamond District ballpark.

The New York-based agency also put a AAA rating on a $121 million GO bond issued to refinance a portion of the city’s unfunded actuarial liability to the Richmond Retirement System for city employees.

Fitch said in its announcement that the upgrades reflect the implementation of new rating criteria for local governments. It noted that Richmond’s credit quality rating relative to Fitch’s rating portfolio for local governments is at the lower end of the range for its AAA rating.

Favorable credit ratings allow the city to borrow money at lower interest rates and spend less on borrowing costs, saving taxpayer dollars that can then be put toward city services and other uses.

Richmond’s credit ratings with the other big agencies, Standard & Poor’s Global Ratings and Moody’s Investor Service, remain AA+ and Aa1, respectively. A “Triple AAA” from all three agencies is the highest possible endorsement.

At Thursday’s event, officials celebrated the AAA from Fitch, which Mayor Levar Stoney said is the first in Richmond’s history, while also committing to achieving a Triple AAA, the rating level shared by the neighboring counties of Chesterfield, Hanover and Henrico.

“Make no mistake, we cannot stop here. The work continues,” said Sabrina Joy-Hogg, Richmond’s deputy chief administrative officer for finance and administration. “We need to be a team for Triple A rating, and we need to continue to reach the same status with the other two agencies as well.”

FitchRating2

Dozens of attendees gathered in the City Hall observation deck for Thursday’s news conference and reception.

Stoney described Fitch’s rating as putting Richmond “among an elite class of localities” in Virginia and across the country “that have proven financial responsibility at the highest level.” He said the rating puts Richmond in “the ranks of Triple A” with Chesterfield, Hanover and Henrico, “packing an unbelievable punch for the metro Richmond region.”

Stoney noted city efforts over his eight years as mayor to improve the city’s finances, including increasing the city’s reserves by $170 million to make what he called the largest reserve balance in Richmond’s history.

“With roughly seven months remaining on my term, I can confidently say we will be leaving Richmond in a robust financial position,” Stoney said.

Joy-Hogg said the reserve balance was achieved through a policy adopted in 2017 that dedicates 50 percent of surplus revenue at the end of each fiscal year to the city’s reserves.

“This policy, along with many other financial decisions the council has made, has led us to this point,” Joy-Hogg said. “We did not get here overnight. This is years in the making.”

Stoney said the AAA rating also “further underscores the positives” of the Diamond District project and validates the change in the financing approach to the project that City Council approved earlier this month. The new funding approach involves the city issuing its own bonds rather than using a community development authority and collateral from developer Diamond District Partners.

While the change puts the city on the hook to repay the bonds should the stadium not be built or the larger development fail, the move is projected to save the city $215 million in debt costs over the 30-year length of the loans because of a lower municipal interest rate based on the city’s credit rating. With Fitch’s AAA rating, that interest rate could be even lower.

The $170 million in bonds consist of the $130 million in GO bonds to finance the ballpark, and $40 million in lease revenue bonds for infrastructure improvements for the development’s first phase. The financing plan was recommended by Davenport & Co., the city’s financial adviser.

Stoney acknowledged Davenport’s David Rose and Roland Kooch along with city administrators he credited with achieving the rating upgrade: Chief Administrative Officer Lincoln Saunders, Joy-Hogg, Finance Director Sheila White and budget director Meghan Brown. Stoney also acknowledged his predecessors and previous city administrations for working to get the city to this stage.

Joining Stoney were council President Kristen Nye, members Nicole Jones, Katherine Jordan and Ellen Robertson, and former President Michael Jones, now a state delegate. Nye likewise credited the efforts of city employees and officials past and present.

“We’ve really turned around the trajectory of our financial picture in Richmond,” Nye said. “I want to thank not only everybody in this room, everybody standing up here, but also people who’ve been on council, people who have worked in the city who are no longer here but have really helped us move in that direction.”

FitchRating1

City administrators, financial advisers and councilmembers joined Mayor Levar Stoney for Thursday’s announcement. (Jonathan Spiers photos)

Changing its approach to financing the Diamond District has helped the City of Richmond achieve its first AAA credit rating, the highest possible, from one of the big three U.S. bond rating agencies.

City officials on Thursday celebrated the upgrade from Fitch Ratings with a news conference and reception in the observation deck atop City Hall.

The upgrade from the city’s previous AA+ rating was announced Wednesday by Fitch, which increased Richmond’s issuer default rating and outstanding general obligation to AAA (vocalized as “Triple A”) as a result of it assigning AAA ratings to two bond series recently issued by the city, including $130 million in general obligation (GO) bonds to finance the new Diamond District ballpark.

The New York-based agency also put a AAA rating on a $121 million GO bond issued to refinance a portion of the city’s unfunded actuarial liability to the Richmond Retirement System for city employees.

Fitch said in its announcement that the upgrades reflect the implementation of new rating criteria for local governments. It noted that Richmond’s credit quality rating relative to Fitch’s rating portfolio for local governments is at the lower end of the range for its AAA rating.

Favorable credit ratings allow the city to borrow money at lower interest rates and spend less on borrowing costs, saving taxpayer dollars that can then be put toward city services and other uses.

Richmond’s credit ratings with the other big agencies, Standard & Poor’s Global Ratings and Moody’s Investor Service, remain AA+ and Aa1, respectively. A “Triple AAA” from all three agencies is the highest possible endorsement.

At Thursday’s event, officials celebrated the AAA from Fitch, which Mayor Levar Stoney said is the first in Richmond’s history, while also committing to achieving a Triple AAA, the rating level shared by the neighboring counties of Chesterfield, Hanover and Henrico.

“Make no mistake, we cannot stop here. The work continues,” said Sabrina Joy-Hogg, Richmond’s deputy chief administrative officer for finance and administration. “We need to be a team for Triple A rating, and we need to continue to reach the same status with the other two agencies as well.”

FitchRating2

Dozens of attendees gathered in the City Hall observation deck for Thursday’s news conference and reception.

Stoney described Fitch’s rating as putting Richmond “among an elite class of localities” in Virginia and across the country “that have proven financial responsibility at the highest level.” He said the rating puts Richmond in “the ranks of Triple A” with Chesterfield, Hanover and Henrico, “packing an unbelievable punch for the metro Richmond region.”

Stoney noted city efforts over his eight years as mayor to improve the city’s finances, including increasing the city’s reserves by $170 million to make what he called the largest reserve balance in Richmond’s history.

“With roughly seven months remaining on my term, I can confidently say we will be leaving Richmond in a robust financial position,” Stoney said.

Joy-Hogg said the reserve balance was achieved through a policy adopted in 2017 that dedicates 50 percent of surplus revenue at the end of each fiscal year to the city’s reserves.

“This policy, along with many other financial decisions the council has made, has led us to this point,” Joy-Hogg said. “We did not get here overnight. This is years in the making.”

Stoney said the AAA rating also “further underscores the positives” of the Diamond District project and validates the change in the financing approach to the project that City Council approved earlier this month. The new funding approach involves the city issuing its own bonds rather than using a community development authority and collateral from developer Diamond District Partners.

While the change puts the city on the hook to repay the bonds should the stadium not be built or the larger development fail, the move is projected to save the city $215 million in debt costs over the 30-year length of the loans because of a lower municipal interest rate based on the city’s credit rating. With Fitch’s AAA rating, that interest rate could be even lower.

The $170 million in bonds consist of the $130 million in GO bonds to finance the ballpark, and $40 million in lease revenue bonds for infrastructure improvements for the development’s first phase. The financing plan was recommended by Davenport & Co., the city’s financial adviser.

Stoney acknowledged Davenport’s David Rose and Roland Kooch along with city administrators he credited with achieving the rating upgrade: Chief Administrative Officer Lincoln Saunders, Joy-Hogg, Finance Director Sheila White and budget director Meghan Brown. Stoney also acknowledged his predecessors and previous city administrations for working to get the city to this stage.

Joining Stoney were council President Kristen Nye, members Nicole Jones, Katherine Jordan and Ellen Robertson, and former President Michael Jones, now a state delegate. Nye likewise credited the efforts of city employees and officials past and present.

“We’ve really turned around the trajectory of our financial picture in Richmond,” Nye said. “I want to thank not only everybody in this room, everybody standing up here, but also people who’ve been on council, people who have worked in the city who are no longer here but have really helped us move in that direction.”

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Jeff Stein
Jeff Stein
1 month ago

I see the mayor and several city council members who voted in favor of Navy Hill ceremoniously taking credit for the AAA rating. Richmond has that a AAA rating in spite of their leadership, not because of it. They should be thanking the Richmond citizens for constantly having to watchdog them away from disastrous financial schemes.

Shawn Harper
Shawn Harper
1 month ago
Reply to  Jeff Stein

Thank you.

Lonzo Harris
Lonzo Harris
1 month ago

The man deserves a tad bit of credit

Tyler Benson
Tyler Benson
1 month ago
Reply to  Lonzo Harris

For what specific work?

Craig Davis
Craig Davis
1 month ago
Reply to  Lonzo Harris

totally agree. The city haters and Stoney Derangement Syndrome sufferers that populate the comment section on this site are a total bummer. There’s a lot wrong with the way the City is and has been run. There’s a lot to be skeptical of with respect to Stoney’s candidacy for statewide office, but they do occasionally get it right and pursue policies that benefit the city. The AAA rating, the Mayo Island take over, the riverside amphitheater are all tangible successes for the city. Heck, the aborted VCU deal that has VCU paying millions to the city is a financial benefit.

Jeff Stein
Jeff Stein
1 month ago
Reply to  Craig Davis

It’s a shame you acknowledge the flaws of leadership and in the same thought are dismissive of the insane decisions they would’ve made on the backs of taxpayers. These decisions were only rejected because of persistent grass-roots pushback. The credit is not theirs to take.

Shawn Harper
Shawn Harper
1 month ago
Reply to  Jeff Stein

It’s a little strange, isn’t it?

Shawn Harper
Shawn Harper
1 month ago
Reply to  Craig Davis

Truth tellers can be bummers and bubble poppers. Sorry to harsh your mellow but, really, Richmond is doing well for reasons having nothing to do with city hall and it has not merely been Stoney’s Mayorship but also the last guy that has impeded Richmond’s rise — indeed, most people fleeing bad government and high taxes have skipped Richmond for Raliegh. Politicians have a way of taking credit for things they had nothing to do with — even if their intents are to make things less likely to have people create jobs there, invest there, etc. Their job is to… Read more »

Craig Davis
Craig Davis
1 month ago
Reply to  Shawn Harper

you can mock my use of “bummer” all you want – which is par for course for the level of civility frequently found in the comments here in general and your tone in particular – but you’re a prime example of someone who seems to cheer bad news for the city without giving them equal if any credit for the accomplishments.

Shawn Harper
Shawn Harper
1 month ago
Reply to  Craig Davis

What are the accomplishments? Maybe I am just ignorant.

Shawn Harper
Shawn Harper
1 month ago
Reply to  Craig Davis

Oh, and by the way — I NEVER cheer bad news for the city — check my record. Indeed, I try to PREVENT FUTURE bad news for the city and remember a bit longer than maybe some others do why contemporary bad news happened. I suppose you were agreeing with me in the past when I warmed about other things, yes? If you scroll down, I even said that this was good news, even if I confess that I don’t understand how — but I DO know that taxes have not gone down in spite of lots of good things… Read more »

Michael Boyer
Michael Boyer
1 month ago

Oh, thank you Mayor Levar Stony.

Bob Slydell
Bob Slydell
1 month ago

A press conference to celebrate debt.

Michael Morgan-Dodson
Michael Morgan-Dodson
1 month ago
Reply to  Bob Slydell

And the fact the ever increasing costs for food, clothing, basic good (localities get 1% of state sales taxes), housing, and car values along with not cutting a single tax rate has lead to record revenue and record spending. Bond agencies love the numbers and balances but the comparison to the counties by Stoney is funny. The City accomplished this feat with tax rates on average 5% to 30% higher in the City than its neighbors.

Lonzo Harris
Lonzo Harris
1 month ago

When you think of all the money Chesterfield and Henrico save every year because V-dot maintain most of their roads,they will always be able to get things done that Richmond can’t, it’s a big benefit to the Counties.

Shawn Harper
Shawn Harper
1 month ago

Well, this certainly is good news. Would be nice if they could lower tax rates.

Brandon Blair
Brandon Blair
1 month ago
Reply to  Shawn Harper

When Richmond isn’t an independent city anymore and stop allowing the surrounding counties to leach off its resources maybe it’ll happen. Maybe…JUST maybe if you all understood that structure a little more you all wouldn’t be on here sounding like bitter Bettys. The hubris of internet mayors/poltiicians is off the wall.

Michael Morgan-Dodson
Michael Morgan-Dodson
1 month ago
Reply to  Brandon Blair

Yes the land locked city has a higher concentrations of poverty and thus to spends more on social services and old infrastructure but if you ACTUALLY go back on read old stories, view financial reports when deals like Sixth Street Marketplace, Redskins Training Camp, Broad Street CDA have failed they have been wrapped into general fund bonds. Around .07-.10 of the current real estate tax rate has been POOR decision by Stoney and his predecessors that all supports him (Jones got him to be head of state Demo party before Terry made him Sec of Commonwealth) so while yes the… Read more »

Shawn Harper
Shawn Harper
1 month ago

Thank you for your efforts to be an educator.

Peter James
Peter James
1 month ago
Reply to  Brandon Blair

I love and very much appreciate your sentiment and hope, Brandon, that Richmond won’t be an independent city anymore – but the unfortunate reality is that barring something miraculous, that will never happen. For Richmond to either merge with one of the two immediately adjacent suburban counties,(like Nashville and Davidson County, Tennessee, which operate under a consolidated city-county government), or form a regional government with one or both counties (again, similar to Nashville which has an overarching metropolitan council) or to return as the county seats of Henrico and/or Chesterfield (like almost all other cities in the U.S.) would require… Read more »

Shawn Harper
Shawn Harper
1 month ago
Reply to  Peter James

Don’t forget that Richmond itself would not go for it either.

The Counties collectively VASTLY outnumber the City population-wise, and it is unlikely that Richmond would get more county taxes and those that run Richmond would be in the ideological minority and hence not viable candidates for a Greater Richmond.

Shawn Harper
Shawn Harper
1 month ago
Reply to  Peter James

I’ll point out again that I am from the State that has Syracuse and Buffalo and is near the state with Cleveland and Cinncinati — being independent is not always the cause of being miserable.

Shawn Harper
Shawn Harper
1 month ago
Reply to  Brandon Blair

I am always told by the Smart Towns people that Cities are the easiest cheapest things to maintain and manage.

The bitterness you see is merely a reflection. Don’t blame the victims.

Shawn Harper
Shawn Harper
1 month ago
Reply to  Brandon Blair

There are people here who WANT to keep the city majority poor — they complain about all the Come-Heres and the apartments being built “Just for Them” — if the poor in the city continue to stay poor, the only answer is to have more middle class people move here, yes?

I might even say I sense bitterness in YOUR comments, perhaps.

Some people think there are more leeches in the counties, some in the city. Well, maybe we should have that argument — idk.