Rating Agencies Improve Leesburg’s Financial Outlook

This week, the City of Leesburg received some good news regarding its finances and proposed bond issues. The three national bond rating agencies, Moody’s, Standard and Poor’s, and Fitch Ratings, each published their reports of the City’s financial health in the form of bond ratings.   The results for Leesburg were all favorable, reflecting the hard work by the City Commission and administrators to shore-up financial problems caused when reserve funds were depleted by a utility relocation project.

 

A bond rating is an indicator to potential investors of the risk associated with purchase of a particular institution’s bonds. Since Leesburg is going to the bond market for a proposed $50M issuance for electric, water, wastewater, and gas utilities, each agency conducted a comprehensive evaluation of the City’s finances to determine the level of risk, and thus the appropriate rating. 

 

Two agencies gave the City across-the-board “A” category ratings. Moody’s has kept the Electric rating at “A2” and upgraded the Utility (water, wastewater, and gas) rating to “A2” from “A3” (for 2004 and 2007 issuances). Moody’s also has upgraded the City’s “Implied G.O.” (an overall bond rating) to an “A2” from an “A3”. Standard and Poor’s has kept both Electric and Utility issuances at A-.

 

The third agency, Fitch Ratings, kept the City’s Electric rating at “BBB+” and the Utility rating at “A-“, but upgraded the financial outlook for both the Electric and Utility issues from “negative” to “stable”. Fitch also upgraded the rating on the City’s 2004 Capital Improvement Bonds from “A-“ to “A”. The agency had previously assigned a negative outlook to three of the City’s 2004 bond issuances, downgraded the Electric rating from A- to BBB+, and took the Utility rating from A to A-, primarily due to depletion of reserve funds. In its media release on Monday, Fitch said the upgraded outlook “reflects the partial restoration of operating reserves provided primarily by the current taxable bond issue, as well as management’s commitment to build reserves going forward and adhere to long-standing financial policies. Fitch believes maintenance of adequate liquidity and continued adherence to consistent policies will be key credit drivers and could position the system for positive rating action in the coming years.”