The City of Virginia Beach put out a Press Release this afternoon touting that it now has a AAA bond rating from all three major rating agencies: Standard & Poor's, Moody's, and Fitch.
Standard and Poor's had given the rating in 2007, with the other two agencies joining them on Monday. From a political standpoint, the ramifications are very interesting.
First, with a couple major capital projects in the pipes, the financial giants have said Virginia Beach is in a very good position to issue bonds to borrow.
Second, it blows out of the water a strategy that the Virginia Beach Taxpayers Alliance (VBTA) has been trying to push for over a year now: trying to make an issue of the City debt. With the filing deadline for Council seats about a month away, the incumbents would love for VBTA challengers to bring up the debt issue. All the incumbents will have to do is point to the bond ratings.
Finally, I have to point out that Fitch specifically cited Virginia Beach's pursuit of light rail as a reason to upgrade our rating. So the VBTA has been desperately trying to portray light rail as a financial sinkhole, but the fiscal experts think it's a plus? Maybe it will help some realize the VBTA is dead wrong about light rail....
5 comments:
Very good Henry. Put those in the investment market aren't interested in political spin, but factual credit spreads.
Ratings agencies, in particular Fitch, Moody's and Standard and Poors have been implicitly allowed by the government to fill a quasi-regulatory role, but because they are for-profit entities their incentives may be misaligned. Conflicts of interest often arise because the rating agencies, are paid by the companies issuing the securities — an arrangement that has come under fire as a disincentive for the agencies to be vigilant on behalf of investors. Many market participants no longer rely on the credit agencies ratings systems, even before the economic crisis of 2007-8, preferring instead to use credit spreads to benchmarks like Treasuries or an index. However, since the Federal Reserve requires that structured financial entities be rated by at least two of the three credit agencies, they have a continued obligation.
Wally,
It was the VBTA who first politicized the debt issue, but I don't see you pointing fingers at them.
Apples - Oranges
Debt and debt spread are factual quantitative metrics. The press you reference is a misleading half-truth politicization.
In all candor, the rating only encompass the General Obligation bonds. What about the Economic Development Authority Bonds rated at AA?
EDA bond security assessment:
The bonds are secured by annual payments from the city to the authority, subject to annual appropriation, in an amount sufficient to pay debt service due on the bonds. The authority's payments, assigned to the trustee, will be applied in compliance with the Master Trust Agreement.
What is that? Chopped Liver?
Wally,
You attack me for taking on the political side of the General Obligation Bonds, then turn around and politicize the VBDA bonds yourself? I'll let your comments sink under the weight of the hypocrisy.
Unbelievable! When is an exchange of opinions and facts an attack? Forget it. As far as I'm concerned, this thread is over.
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