Fairfax County Sells AAA-Rated Bonds
Fairfax County Office of Public
12000 Government Center Parkway, Suite 551
Fairfax, VA 22035-0065
703-324-3187, TTY 711, FAX 703-324-2010
Aug. 5, 2005
Fairfax County Sells AAA-Rated Bonds
On Wednesday, Aug. 3, Fairfax County sold $543.59 million in Aaa/AAA/AAA-rated tax-free general obligation and refunding 1-to-20-year bonds for public improvements at the fourth lowest interest rate achieved by the county in 30 years since the AAA rating was awarded. This was the largest bond sale ever conducted by the county as nearly all possible candidates were refunded.
The bonds were sold to Lehman Brothers at a true interest rate of 3.882 percent. The lowest rate the county has ever received for 20-year bonds was 3.54 percent in March 2004.
The county received six bids for the bonds with a high bid of 3.896 percent. The closeness of the bids is an indication of the highly competitive nature of the sale. The sale of new public improvement bonds will provide total proceeds of $199.45 million for projects at schools ($109.69 million); parks and park facilities ($20 million); public library facilities ($10.6 million); transportation improvements and facilities ($48.72 million); human services facilities ($4.69 million) and adult detention facilities ($5.75 million). Voter authorization for the sale of these bonds was given by referenda in elections held from 1988 to 2004.
The refunding will result in savings of approximately $11.86 million net present value of the bonds refunded. The refunding bonds were sold to take advantage of current market conditions and low interest rates in order to refund outstanding bonds that have higher interest rates and are subject to redemption prior to their stated maturities. The refunding bonds will fund an escrow account and redeem the outstanding bond obligations at their earliest possible call dates. Future bond sales are not expected to be this large as the county has taken full advantage of low interest rates and has exhausted the possibilities for refunding over the next few years.
With this bond issue, Fairfax County maintains its status as a top rated issuer of tax-free securities from Moody’s Investor Services, Standard and Poor’s Corporation and Fitch Ratings. Fairfax County has the highest credit rating possible for a local government – Aaa from Moody’s Investors Service Inc., AAA from Standard and Poor’s Corporation and AAA from Fitch Ratings. As of Aug. 3, only six states, 22 counties and 20 cities have Triple-A ratings from all three investor services. The credit ratings enable Fairfax County to sell bonds at favorable interest rates compared to those of municipalities not so rated, resulting in substantial savings for county taxpayers over the life of the bonds.
Since 1978, including this sale, Fairfax County has saved more than $243.48 million in reduced interest costs as a result of the AAA rating when compared to the Bond Buyer index at the time of the sales. The county also has refunded approximately $1.9 billion of the outstanding general obligation debt since 1989 for cumulative net present value savings of approximately $100 million. All together, the county has saved more than $343.94 million through county bond and refunding sales as a result of the AAA rating.
In addition to the Aaa/AAA/AAA bonds sold, the Fairfax County Economic Development Authority sold parking revenue refunding bonds for the Vienna II Metrorail Station Project on Thursday, Aug. 4. The Aa2/AA/AA-rated bonds were sold to ABN AMRO Financial Services Inc. at an interest rate of 3.93 percent for $18.695 million. The sale resulted in a net present value savings of $1.2 million, or 6.95 percent of the refunded par amount. Average annual savings over the life of the bonds will be approximately $113,000. This refunding savings is available for future parking needs at Fairfax County Metrorail Stations.
The interest rate is a reflection of the strong
credit rating of the county, as well as the market conditions. The rate
obtained was approximately 12 basis points lower than what would be
normally anticipated for this type of bond issue with the Aa2/AA/AA
rating. According to Moody’s, “The high grade rating is based on Fairfax
County’s contractual obligation to ultimately pay debt service or
replenish any deficiency in the debt service reserve; the county’s strong
fundamental credit characteristics (general obligation bond rating Aaa)
reflected in its sizeable, diverse economy; and history of favorable
operating performance by parking facilities.”
For more information, contact Leonard Wales, county debt manager, at 703-324-4087, TTY 711.