Rating Agencies Affirm Fredericksburg's Credit During Coronavirus

FREDERICKSBURG, VA — The nation's three major bond rating agencies — Fitch Investor's Service, Moody’s and S&P Global Ratings — confirmed their credit ratings for the City of Fredericksburg after reviewing a proposed refinancing of the city’s 2011 general obligation bonds, the city said Monday.

Prior to confirming their credit ratings, analysts at the three rating agencies discussed with Fredericksburg officials the city's growth and economy, and the effects of the coronavirus crisis and the related financial downturn.

Fredericksburg’s refinancing, which does not extend the due date on the remaining bonds, will provide an estimated $1.6 million in debt service savings in fiscal year 2021, which will help the city manage the effects of the economic downturn related to the coronavirus crisis.

The city placed about 40 employees on furlough status, effective Saturday, due to the coronavirus crisis wreaking havoc on the city's revenues. The furlough period is expected to last at least until July 31. By mid-July, the employees will be notified of their employment status as of Aug. 1, the city said.

Fredericksburg also implemented a salary reduction of two percent on salaries up to $70,000 and a three-percent reduction on salaries above $70,000 for non-public safety employees, effective Saturday. The city is projecting a $4 million to $8 million gap in revenues for the current fiscal year.

S&P Global Ratings assigned a AA+ rating to the city’s upcoming bond issuance. Fitch assigned a AA+ rating to the issue. Moody’s assigned an underlying rating of Aa2, enhanced to Aa1 based on Virginia state law credit protections. These rating are all one notch from AAA ratings, the highest rating available.

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“The COVID-19 virus is a terrible tragedy, in so many ways. There is no doubt that financially, the city will have less revenue in both FY 2020 and FY 2021 to meet our obligations, and that we will have to make many hard decisions as a result," Fredericksburg City Manager Timothy J. Baroody said Monday in a statement.

"I am pleased though that the rating agencies’ recognized our work to date to mitigate the financial impacts of the crisis and our underlying strengths as a community led all three to affirm Fredericksburg’s high credit ratings,” Baroody said.

The sale of the refunding bonds is currently scheduled for Wednesday.

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