[Archived] City of Alexandria Earns Historically Low Interest Rates on Bonds After AAA/Aaa Ratings are Reaffirmed

For Immediate Release: August 1, 2016

After both major rating agencies reaffirmed the City of Alexandria’s top bond ratings, the City earned historically low interest rates on the competitive sale of these new bonds.

On July 26, the City issued $73.7 million in general obligation bonds, which will be used for schools, parks, Metro and other transportation improvements and infrastructure, and public buildings.  The bonds, which will be repaid over a 20-year period, sold at a true interest cost of 2.12%, which is the lowest the City has earned in recent years.  “True interest cost” represents the total cost of the debt, and includes interest payments, fees, and other components.  The City received nine bids from various banks and financial groups.

The low interest rates are the result of the City’s “AAA” and “Aaa” credit ratings from S & P Global Rating Services and Moody’s Investors Service, respectively, which were reaffirmed earlier in July.  The City has maintained these top grades from both major bond rating agencies since 1992.  The higher the rating, the lower the interest rate required by bond investors.  The City’s highest bond ratings and historically low interest rates result in the lowest possible borrowing costs for Alexandria’s taxpayers to fund capital projects.

“Once again, the bond rating agencies have given Alexandria top marks, which means a very favorable interest rate.  This reflects our strong economy, sound financial policies and solid management, as well as the City’s proven reputation in the financial community,” said Mayor Allison Silberberg.  “This will save taxpayers millions of dollars and strengthen our future fiscal outlook.”

When interest rates are low, investors often offer a premium above the face value of a bond, in the hope they can sell at higher rates in the future.  In this case, the City will receive a $10.5 million premium so that $84.2 million in funding for capital projects will be available after issuing only $73.7 million in bonds.

For media inquiries, contact Craig T. Fifer, Director of Communications and Public Information, at craig.fifer@alexandriava.gov or 703.746.3965.