The City of Lynchburg sold $115,190,000 in general obligation bonds on June 10 at a true interest cost of 3.4%. The City received six bids with J.P. Morgan offering the lowest interest rate. The bids were quite competitive, ranging from a low bid of 3.40% to a high of 3.47%. Wells Fargo, Bank of America, Citigroup, Barclays Bank, and Morgan Stanley were among the bidders. The sale included new bonds for Heritage High School and other capital projects as well as a refunding of a prior bond issue that netted the City $1.1 million of present value savings.
Standard and Poor’s (AA+), Moody’s, (Aa2) and Fitch (AA+) each affirmed the City’s prior credit rating. For a city, a bond rating is equivalent to a credit rating for an individual and is based on its credit worthiness or ability to meet its financial obligations. According to the credit rating reports, the City’s bond rating was affirmed due to several factors. In summary, the findings are as follows:
Sound Financial Position
Lynchburg’s financial condition is solid, reflecting prudent fiscal policies and planning, consistent surplus operations and maintenance of a strong fund balance position. The city’s diverse revenue stream and property tax revenue autonomy are other credit strengths. Standard and Poor’s referenced the city’s management conditions as very strong with strong financial practices.
Stable and Diverse Tax Base
Moody’s referenced the city’s stable and diverse tax base, serving as the regional commercial center and citing the multiple institutions of higher education and a large regional health care facility as assets. The report also noted the presence of Babcock and Wilcox (B&W) and Areva in the city as well as Centra as being major employers in the city.
Affordable Debt Profile
Fitch rated the city’s debt level as moderately low with overall debt equaling $2,516 per capita and 3.4% of market value.
The bond rating agencies made note of the city’s below average wealth levels with median household income of 79% of the nation. However, the reports also made note that the presence of a sizable student population tends to negatively skew wealth indices.
“We are very pleased that all three bond rating agencies have affirmed the City’s excellent bond rating,” said City Manager Kim Payne. “We were able to receive a low interest rate of 3.4% today because of the City’s good standing. That translates into long term savings for our citizens.”
Moody's Investors Service
Standard & Poor's Ratings Services