Fitch Ratings has assigned 'AAA' ratings to the Commonwealth of Virginia's general obligation (GO) bonds as follows:
--$148,475,000 GO bonds, series 2009B;
--$9,150,000 GO refunding bonds, series 2009C;
--$94,895,000 GO refunding bonds, series 2009D.
Bond proceeds will refinance certain outstanding GO bonds and will finance various new money projects. The bonds are expected to be offered competitively on Oct. 6, 2009. In addition, Fitch has affirmed the rating on the commonwealth's approximately $1.7 billion in outstanding GO debt at 'AAA'. Further, Fitch withdraws the 'AAA' rating assigned to the commonwealth's series 2009B GO bonds on June 8, 2009 as that series was not sold. The Rating Outlook is Stable.
The commonwealth's 'AAA' rating reflects its substantial economic resources, conservative approach to financial operations, which include periodic revenue forecast updates, and careful attention to the level of its debt obligations. While the national recession has affected state revenues, resulting in downward revisions totaling $5.6 billion over the course of the 2008-2010 biennium, Virginia has implemented balancing measures which include appropriation cuts, the replacement of pay-as-you-go capital spending with bonding, staff reductions, use of portions of federal stimulus monies for Medicaid and state fiscal stabilization, and a withdrawal of $490 million from the revenue stabilization fund in fiscal 2009. An additional withdrawal of $283 million was recently proposed, though legislative approval will be necessary. At the end of fiscal 2010, the fund is expected to hold approximately $300 million after the draw, representing 2.1% of fiscal 2010 revenues, down from $575 million at the end of fiscal 2009.
The mid-biennium budget bill proposed ending the 2008-2010 biennium with approximately $160 million in fund balance. Total commonwealth flexibility heading into fiscal 2011, inclusive of the balance in the revenue stabilization fund and expected stimulus monies for K-12 and higher education purposes, was projected to total over $1.2 billion, or approximately 8.7% of fiscal 2010 revenues. However, revenue performance through the balance of fiscal 2009 was nearly $300 million below February 2009 estimates. Fiscal 2009 general fund revenues declined by 9.2% compared to the prior year, versus the projected decline of 7.3%. Sales tax receipts declined by 5.6%, falling further than the expected decline of 3.7%, while net individual income tax receipts declined by 6.3%, a greater margin than the projected 4.1% rate of decline. The governor has proposed corrective measures totaling $1.35 billion, inclusive of the additional revenue stabilization fund withdrawal noted earlier, to meet the fiscal 2009 shortfall and lowered expectations for fiscal 2010. Commonwealth flexibility going into fiscal 2011, should revenues hold, now totals approximately $630 million, or 4.5% of fiscal 2010 revenue.
The commonwealth benefits from a diverse economic base and high wealth levels. Strong employment gains in recent years moderated in 2007 to 0.9%, slightly below the national growth rate, and figures for 2008 indicate that state employment declined 0.1% for the year. Employment contraction has accelerated since fourth quarter 2008, and August 2009 employment was down 3% from the prior year, which compared favorably with a national loss of 4.4% over the same period. State unemployment, at 4% for 2008, increased to 6.5% in August 2009, lower than the national rate of 9.7%. Personal income growth for 2008 was 3.7%, short of national growth of 3.9%. At $42,876, personal income per capita equaled 107.9% of the U.S. average in 2008, ranking eighth among the states.
The commonwealth's debt ratios are in the lower moderate range and have grown over the past fiscal year. As of June 30, 2009, net tax-supported debt totaled $8.7 billion, equal to $1,125 per capita and 2.6% of preliminary 2008 personal income. General obligation debt constitutes approximately 19% of net tax-supported debt, with the remainder principally represented by various appropriation credits. Capital needs for higher education and transportation improvements remain large.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 'www.fitchratings.com'. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
Contacts:
Fitch Ratings, New York
Kenneth T. Weinstein, 212-908-0571
Karen
Krop, 212-908-0661
or
Media Relations:
Cindy Stoller,
212-908-0526
Email: cindy.stoller@fitchratings.com
