Citing the Town of Wake Forest’s “very strong” financial management and budgetary flexibility, Standard & Poor’s and Fitch Rating Services have given the town their highest rating, AAA, for the $16.8 million in bonds it will sell next Tuesday. The bond funds will pay for greenway and transportation projects, including the Northern Wake Senior Center expansion and the new community center in E. Carroll Joyner Park.
Chief Financial Officer Aileen Staples said the town has been rated AAA by S&P since 2009, a rating that was affirmed in 2015 and 2018, but S&P has just upgraded its management score from “strong” to “very strong.”
This is the “first time we have ever been rated by Fitch,” Staples said in an email. “[F]irst time out to receive AAA is very exciting and rewarding.”
The town has also been rated by Moody’s at Aa1, their second highest rating, Staples said. Their highest is Aaa.
Staples said that “by having two (2) AAAs and Aa1 puts us in a great position to receive competitive pricing on the bonds (lower interest rates)” and lower interest rates on bank loans such as the annual vehicle loans.
“We were very pleased with how our meetings went with all of the rating agencies!” Staples said.
The town’s press release about the ratings explained the ratings as follows: “A credit rating is an opinion on the general creditworthiness of an obligor, or the creditworthiness of an obligor in respect to a particular debt security or other financial obligation. Over the years, credit ratings have achieved wide investor acceptance as convenient tools for differentiating credit quality.
“S&P’s AAA rating reflects its view of the following Town characteristics:
- Strong economy, with access to a broad and diverse metropolitan statistical area (MSA);
- Very strong management, with “strong” financial policies and practices;
- Strong budgetary performance
- Very strong budgetary flexibility
“According to S&P, the outlook remains stable, while the management score was upgraded from “strong” to “very strong.”
“The “stable” outlook reflects S&P’s opinion that “Wake Forest’s very strong management practices will enable to Town to maintain its strong financial performance and very strong budgetary flexibility. S&P also believes the town’s active management of its debt profile and strong and growing economy provide additional rating stability.”
“An outlook notation indicates the possible direction in which a rating may move over the next six months to two years. A “stable” rating indicates the rating is “unlikely” to change.
“S&P revised Wake Forest’s management score from “strong” to “very strong” based on the Town’s recently adopted comprehensive five-year financial forecast and updated formal reserve policy.
“Management practices include conservative budget assumptions that take into account historical trend analysis and limit the use of reserves primarily to nonrecurring expenditures; monthly and quarterly budget-to-actual and cash reports to elected officials; a five-year capital plan that is updated annually and identifies sources and uses of funding; and a formal debt policy with affordability metrics that are regularly measured.”
“Fitch’s AAA Issuer Default Rating (IDR) and GO ratings reflect the Town’s “strong financial performance and growth prospects, a long-term liability burden that is expected to settle at the low end of the moderate range, and broad budgetary management tools supplemented by ample reserves.”
“In its report, Fitch also stated “the Town’s budget flexibility and ample general fund balance allow it to comfortably manage through economic downturns without diminishing its overall financial flexibility.”
“Finally, Fitch’s scenario analysis “highlights the Town’s strong financial resilience given its low historical revenue volatility and superior inherent budget flexibility, in addition to solid reserves. Fitch expects the Town will maintain a high level of financial flexibility throughout economic downturns.”
“Meanwhile, Moody’s Investors Service assigned a rating of Aa1 to the GO bonds and maintained the Aa1 rating on the outstanding GO debt.
“The Town’s excellent bond rating communicates to businesses and individuals that Wake Forest is a healthy community. It signals current and potential investors that the Town’s financial future is strong and ensures Wake Forest’s interest costs will remain as low as possible.”
