Richmond receives AAA bond rating for first time (2024)

For the first time in its history, Richmond has received a AAA bond rating — the highest possible mark of financial success.

Fitch, one of three municipal credit agencies, upgraded the city’s rating this week from its previous general obligation debt rating of AA+. As a result, the city will now be able to borrow more funds at the lowest possible interest rate — saving the city millions in interest on capital projects.

“These dollars will flow right back to our residents and go toward projects that will directly improve their daily lives,” Mayor Levar Stoney said at a news conference announcing the upgrade. “This rating is a game-changer for Richmond.”

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The bond rating functions similarly to an individual’s credit score. The lower the rating, the more the city has to pay back in interest. Likewise, the higher the rating, the less the city has to pay back.

This rating change will have lasting impacts on future projects, including the city’s most recent bond revenue-funded project, the Diamond District, which carries with it a $170 million price tag. A spokesperson with the Mayor’s Office confirmed that this new rating will likely lower that cost.

The city estimates it will save roughly $25 million over the life of all current bonds, said Deputy Chief Administrative Officer Sabrina Joy-Hogg.

“The savings can help us build another fire station, improve our parks or build another police station,” Joy-Hogg said.

Richmond receives AAA bond rating for first time (3)

Additionally, the rating will allow the city to leverage more funds during times of economic uncertainty. By having a stronger windfall, it is in a better position than other localities that do not have the same debt capacities.

“We recognize the importance of having a financial safety net to weather economic uncertainty and unforeseen challenges,” said Chief Administrative Officer Lincoln Saunders. “By setting a clear goal for our reserve funds, we have strengthened our financial resilience and positioned ourselves for long-term stability.”

The announcement came Thursday morning from Stoney, who welcomed dozens of city officials, organizations and community members to City Hall’s observation deck. There, he outlined the importance of the rating and the implications it will have on growth and development.

Stoney credited the finance department, the City Council and the administration’s work in ensuring the city remains fiscally responsible to be considered among the “elite class of localities” in the state with this rating.

In the Richmond metro region, Chesterfield, Hanover and Henrico counties have AAA ratings.

Norfolk, of similar population size to Richmond, also has a AAA rating along with Poquoson, Suffolk and Virginia Beach.

Richmond receives AAA bond rating for first time (5)

S&P Global and Moody’s, the other two municipal credit agencies, have rated Richmond’s general obligation bonds one step below AAA status at AA+ and Aa1, respectively.

Fitch’s profile of Richmond refers to the city as the “hub of a growing metropolitan area” largely in part from its “education and health services” anchored by Virginia Commonwealth University and VCU Health System.

In 2020, Stoney announced the city had received its previous Aa1 rating and said his goal before leaving office was to elevate it. With the recent upgrade, Stoney said he is confident his administration is leaving the office in good standing for the next mayor.

Prior to 2020, the city had not seen a change in its bond ratings since 2014.

“This is not just a win for this administration, for this mayor, for this council — this is a win for the entire city of Richmond, all 230,000-plus residents that call Richmond home,” Saunders said.

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Em Holter (804) 649-6178

eholter@timesdispatch.com

Tracking the news

WHAT IT MEANS: Rating agencies rank governments on the ability to manage its credit.

HOW RICHMOND RANKS: Fitch has ranked Richmond AAA, which is the highest for creditworthiness, based on the ability to meet financial commitments.

WHY IT MATTERS: Municipalities with high rankings can typically borrow funds at a lower interest rate.

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Richmond receives AAA bond rating for first time (2024)
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