Chattanooga borrows at its lowest rate as bond agencies give city and county governments top ratings
The governments of Chattanooga and Hamilton County have maintained their best bond ratings, reflecting projections that the Chattanooga economy will continue to outperform the US economy.
Major bond rating agencies – Fitch, Moody’s and S&P Bond – have all recently awarded city and county governments AAA ratings for their financial health.
The favorable ratings, which for Fitch represented an improvement for the City of Chattanooga to its highest rating since 2007, helped Chattanooga lower the interest rate paid on a new 10-year bond issue to the lowest rate. never recorded.
The city on Tuesday sold $ 40.6 million in bonds with an interest rate of 0.744570%.
The 10-year notes, referred to as the Series 2021A and Series 2021B bonds, attracted nine competitive bids, and the effective borrowing rate is a fraction of the replaced bonds, which carried a nominal interest rate included between 2.5% and 4%.
City officials predict that the new bonds, which include $ 15.1 million in new general bonds and $ 25.5 million in repaid general bonds, will allow the city to achieve net savings of more than $ 2.5 million. dollars due to the fall in the effective interest rate on the notes.
“Chattanooga’s financial health has never been better, and we are now in an excellent position to borrow cheaply in the future,” said Daisy Madison, the city’s chief financial officer, who is preparing to take her position. retirement after nearly three decades as mayor. .
In its assessment, Fitch Ratings said Chattanooga is expected to “maintain strong financial resilience throughout the business cycle” and that “Fitch expects fiscal performance to be consistent … given the city’s history in prudent budgeting and maintaining healthy reserves above its political demands. “
Fitch also cited the positive impact of Volkswagen’s expansion plans, the creation of the downtown innovation district, the increase in high-tech companies and the significant growth in real estate values.
“Historic growth in income and taxable values have exceeded growth in national GDP, a trend that Fitch Ratings expects to continue due to ongoing economic development and expected population growth,” Fitch said in his Chattanooga evaluation.
Chattanooga increased its property tax revenue this year, in large part to increase the wages of municipal government employees. Chattanooga also received $ 38.6 million in American Rescue Plan Act funds, with the first installment being received in May 2021 and the remaining half to be received in 2022. Mayor Tim Kelly said the city plans to use these funds to support public health and housing. initiatives, including investing in underserved communities and improving local infrastructure.
“As we seek to make unique investments in Chattanooga’s infrastructure, this affirmation of our fiscal resilience means we are well positioned to build a stronger community at a lower cost to taxpayers,” said Kelly. “The financial sector’s confidence in our budget and our economy will position us better to improve our streets, our public transit system, our water and sewer infrastructure, our parks and outdoor spaces, as well as essential public services. – which together can unleash the true potential of Chattanooga. “
The Hamilton County government also scored top marks due to its relatively low debt and expected economic growth. The county has not increased its property taxes this year and has canceled the effective rate to compensate for the average increase in assessments from the recent reassessment process.
“The county is experiencing strong growth in the economic base,” Fitch rating agency said in its assessment of Hamilton County. “There are currently several projects at different stages of development within the counties which will create several new sources of employment.”
Hamilton County Mayor Jim Coppinger said he was happy bond rating agencies gave top marks to the county’s budget and fiscal health.
“It is yet another assertion of my belief that conservative fiscal policies coupled with an aggressive drive to create economic development have enabled this country to be seen as an example of good fiscal stance,” Coppinger said.
Contact Dave Flessner at [email protected] or 423-757-6340.