On Monday, Moody’s Investors Service joined Standard & Poor’s (S&P) and Fitch Ratings Services in assigning a triple A rating to the Town of Wake Forest’s $1.3 million General Obligation (GO) Public Improvement Bonds, Series 2021A and $4.9 million General Obligation Public Improvement Bonds, Series 2021B. This marks the first time in its history that Wake Forest has received a triple A rating – the best possible – by all three national credit rating agencies.
“This is incredibly exciting news for Wake Forest,” said Chief Financial Officer Aileen Staples. “This (triple A rating from all three ratings agencies) has been something we have been working towards for a long time. Its achievement aligns with Goal 4 in our Strategic Plan – Fiscal Strength – which is a direct result of our strong financial policies, cautious and conservative fiscal planning and prudent budgetary monitoring. A triple A rating by all three agencies is a significant accomplishment which acknowledges our strong fiscal position and one of which we can all be proud.”
Moody’s upgraded the Town’s general obligation bond rating to Aaa from Aa1, affecting approximately $18.2 million in publicly held outstanding debt, the Town also has $6.9 million in privately placed general obligation debt outstanding.
Wake Forest is now one of only 13 municipalities in North Carolina and one of 172 in the United States to attain the Aaa rating from Moody’s.
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.
According to Moody’s, it’s decision to upgrade Wake Forest to Aaa “reflects the Town’s rapidly growing tax base, which benefits from its strategic proximity to the Research Triangle region and above average wealth indicators. The rating also incorporates the Town’s healthy financial position supported by active fiscal management, formal policies. The Town’s fixed costs are elevated reflecting above average debt service costs; however, overall long-term liabilities are manageable.”
S&P’s “AAA” rating reflects its view of a few of the following Town characteristics:
Strong economy, with access to a broad and diverse metropolitan statistical area;
Very strong management, with strong financial policies and practices under our Financial Management Assessment (FMA) methodology;
Strong budgetary performance, with operating results in fiscal 2020 that reflect one-time expenditures that we do not expect for fiscal 2021;
Very strong budgetary flexibility, with an available fund balance in fiscal 2020 of 24% of operating expenditures;
According to S&P, the outlook remains stable, while the management score was rated “very strong.” 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.
Wake Forest’s “very strong” management score was based on its “strong financial policies and practices.”
“The Town’s management is very strong, with strong financial policies and practices under our financial management assessment, indicating our view of comprehensive planning that we believe is well embedded and likely sustainable,” noted S&P. “Management utilizes conservative budgeting assumptions that review historical trends to formulate the upcoming year’s revenue and expenditure forecast.”
Fitch’s AAA Issuer Default Rating (IDR) and GO ratings reflect the Town’s “strong financial performance and growth prospects, a low long-term liability burden, and broad budgetary management tools enhanced by ample reserves.”
In its report, Fitch also stated “the Town’s superior 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.”
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.
For more information, or to read the entire reports from S&P, Fitch and Moody’s, visit wakeforestnc.gov and search “Municipal Bond Sales” or contact Chief Financial Officer Aileen Staples at 919-435-9461 or [email protected].