Moody’s Investor Services announced this week that it has upgraded the City of Danville’s bond rating. With the higher score, the City now has higher tier ratings from all three major credit rating agencies.
Moody’s raised the City’s score from “A1” to “Aa3” with a stable outlook. The agency cited modest growth in the tax base as one factor in its decision. The agency also said the City is in a “well-managed financial position” with strong reserves and liquidity, an above average debt profile, and manageable pension costs.
“We are extremely pleased that Moody’s recognizes the City’s financial soundness and fiscal conservatism, as well as recent and potential economic development successes,” Finance Director Michael Adkins said Thursday. “Fitch Ratings, Standard & Poor’s, and now Moody’s all have the City of Danville rated in the double A category, which identifies our credit worthiness as ‘very strong.’”
A bond rating is a grade given to bonds that indicates their credit quality. Bond ratings are expressed as letters ranging from 'AAA', which is the highest grade, to 'C' ("junk"), which is the lowest grade.
Agencies take into account a municipality’s finances, economic outlook and debt service to determine its marketability to investors and businesses. The ratings are important to a municipality because they help determine how much interest it will have to pay on the money it borrows.
With the higher tier rating level from all three agencies, Adkins said Danville will be able to borrow money to finance major projects easier and at a lower interest rate.
Agencies issue new ratings any time a city prepares to sell bonds publicly. Last month, City Council authorized the issuance of general obligation bonds for various public improvements, including $3.8 million for schools.
City Council also voted to refund outstanding maturities of series 2009A general obligation bonds and all of the series 2014A and 2014B general obligation bonds in order to refinance this debt over the remaining life at a lower interest rate.
In 2013, Fitch Ratings was the first major credit rating agency to assign a double A rating (AA-). In 2015, Standard and Poor’s Rating Services (S&P) followed suit, citing “very strong” management and strong financial policies and practices that are “well-embedded and likely sustainable.”
Last month, Fitch and S&P reaffirmed their double A rating for Danville.
