[Archived] City Sells General Obligation Bonds for Public Facilities, Schools, Infrastructure and Metro Capital

June 23, 2009

News Highlights

• Alexandria is the first government in Virginia to issue Build America Bonds, saving $9.5 million
• City’s top AAA/Aaa Bond ratings reaffirmed

Today the City of Alexandria competitively sold $79.7 million in AAA/Aaa-rated general obligation bonds at a favorable overall 3.28% true interest cost. The bonds were bid in two tranches. The first tranche of $35.2 million was for shorter-term traditional tax exempt bonds and drew 10 bidders with the lowest bid submitted by a syndicate of financial firms, led by R.W. Baird & Co. Inc. 

The second tranche of $44.5 million was allowed to be bid as either traditional tax-exempt bonds or taxable Build America Bonds for which the federal government provides a 35% interest rate subsidy. There were 8 bidders for this second tranche of bonds, with the winning Build America Bond bid submitted by a syndicate of financial firms led by Morgan Keegan & Co., Inc.  By using the Build American Bond option, which Congress and President Barack Obama included in the federal stimulus package earlier this year, the City will save approximately $9.5 million in interest costs over the life of the bonds.

The $79.7 million bonds will finance improvements to public buildings, schools and parks, including the initial phase of funding for the new Police Headquarters facility to be constructed on Wheeler Avenue just south of Duke Street. 

The bonds also will refinance $12.8 million in debt previously issued by the Washington Metropolitan Transit Authority (WMATA).  With the City’s top bond ratings, it was less expensive for the City to refinance the WMATA debt, which represented the City share of a portion of the WMATA Metro Matters capital improvement program. It is estimated that over the life of the bonds, the City will save approximately $3 million, compared to WMATA refinancing these bonds.

Standard & Poor’s (S&P) and Moody’s Investors Service reaffirmed the City’s bond ratings of AAA and Aaa, respectively. In reaffirming the City’s Aaa bond rating, Moody’s Investors Service stated that “This highest quality rating reflects the city’s diverse tax base, above average wealth levels, economic stability,” as well as “sound financial operations,” “conservative budgeting,” and “very conservative debt issuance guidelines.”

In reaffirming the City’s AAA bond rating, S&P cited the “deep, diverse and strongly performing local economy,” a tax base that “remains strong,” “strong financial management,” as well as a “moderate-to-low overall debt burden.” S&P also rated the City’s financial management practices “strong,” which is the highest rating given in the financial management category.

“We are pleased that the rating agencies and the overall credit markets responded so well to Alexandria, even in a time of economic downturn,” said Mayor William D. Euille. “The rating agencies’ report cards on the City, the strength of its economy, and its overall finances all reflect well on the current and prior City Councils and City management who have made prudent fiscal management and economic sustainability a priority.” Mayor Euille also stated, “The assistance of the federal government’s new Build America Bond program is highly appreciated, as the borrowing cost subsidy is significant.”

PIO#170-09