Did you know that much like each of us individually, the City has a credit score? In the City’s case that comes in the form of ratings ranging from AAA to D. Much like with individuals, a municipality’s credit score determines their creditworthiness and therefore the ease (and cost) with which they can secure debt. With municipalities this debt is most often provided in the form of Municipal Bonds. In the case of Roanoke our current rating is AA+ and Aa2, an excellent rating that has enabled us to recently borrow funds at record low interest rates.
Every year or so, prior to the City seeking bond funding to enable delivery of capital projects such as a new fire station, library renovations, street paving or similar, we must present our case to a number of credit rating agencies. The three agencies, Moody’s, Fitch Ratings, and S&P Global Ratings – each overseen by the Security and Exchange Commission, review such data as budgets, audits and other financial information to assist them in their determination. This data is supplemented by a presentation made by senior City staff and the City’s financial advisor to each of the agencies. These presentations occurred last week and I wanted to take a few moments to share some of the highlights that were shared.
Strong Leadership – I am fortunate to be surrounded by a strong capable team of professional managers with deep experience in financial management, including a Deputy City Manager, Assistant City Manager and Budget Manager who are all Certified Public Accountants and a Director of Finance with an MBA and who has held leadership roles with the Government Finance Officers Association. This team is assisted by very capable financial advisors, Davenport & Company, LLC consisting of long-tenured professional advisors.
Favorable Economic Conditions – The Roanoke local and regional economy continues its strong performance in a number of key factors including the unemployment rate (3.9% - outperforming Virginia and the U.S.), diversity in principal taxpayers and major employers, a growing population and increasing per capita income and total value of real and personal property – approaching $10 billion. These conditions reflect positively on the local economy.
Strong Local Economic Development – Prior to and during the COVID-19 pandemic, Roanoke has experienced strong and significant economic development. Recent announcements and projects under construction or recently completed include the $500 million Carilion Clinic expansion, redevelopment of the Roanoke Times Press Building, establishment of the downtown headquarters for Freedom First Credit Union, redevelopment of the previous Kroger regional offices to serve as the Branch Group Headquarters, redevelopment of the Sheraton Hotel site into 350 apartments, redevelopment of a former grocery in Grandin Village into Cardinal Bicycle and Café and redevelopment of the former Valley Metro bus transfer station. In downtown alone, over the past ten years, there has been more than $620 million of private development.
Sound Financial Management – In addition to annual balanced budgets, the City has been able to place nearly $50 million dollars in reserve to protect against catastrophic events – reaching targets ahead of schedule, continues to retire most of its debt earlier than its due date, had, as of the end of FY21, more than 90% of its pension liability covered – well in excess of the average for such pension funds, and has been able to invest tens of millions of dollars in much needed equipment and facilities through its capital investment program.
Within the next few weeks we will find out how we did as each of the agencies provide their ratings and we take those and seek to secure this year’s debt. With a long list of needs and in an environment of increasing interest rates, favorable ratings are more important than ever. Thankfully, in spite of two-plus years of life in a pandemic, our local economy and our financial position is as strong as ever, which should enable us to continue to borrow funds under favorable terms and therefore continue to deliver the services, equipment and facilities needed in our community.
-- Bob Cowell