The financial services company Standard & Poor’s raised the city of Williamsburg’s long-term bond rating from AA+ to AAA April 8, indicating a stable economic outlook through 2016. The rating is the highest that S&P issues.
“The rating is uplifting to a community,” City Manager Jack Tuttle said.
S&P, which rates many types of financial entities, including banks and countries, first rated the city in 2010. Williamsburg solicited its first rating, but the recent upgrade was unsolicited.
“It’s a respected outside source looking at the city’s economic condition, and giving it what you might call a USDA Grade A rating,” Tuttle said.
In its report, which is available online, the company credits City Council for strong financial management.
“We believe that the city’s strong management has contributed to financial strength that mitigates some of the risk associated with the tourism-based local economy,” S&P said in a release.
The Virginia Gazette reported the day after the rating upgrade that the tourism industry in Williamsburg has not yet recovered from the slump caused by the economic recession in 2008. Williamsburg’s budget indicates that sales tax revenues, a primary source of investment income, remain nearly four hundred thousand dollars short of their 2008 peak.
“Our city is performing fairly well despite the lagging tourism economy, but I still think there is significant room for improvement in tourism,” City Councilman Scott Foster ’10 J.D. ’14 said. Foster, who is looking to get reelected when his term expires in June, credited the rating to the city’s large reserves and fiscal prudence.
Though the ratings agency acknowledged that Williamsburg’s tourism-based economy is highly volatile, it said the city could mitigate the risks associated with that volatility.
Tuttle said that the city has already taken many stabilizing actions. For instance, Williamsburg sets aside 35 percent of its annual revenues in savings. The ratings agency praised the city’s high level of liquidity, which often exceeded the thirty-five percent minimum.
S&P’s report also credited the College of William and Mary, Williamsburg’s largest employer, for its stabilizing effect on the city’s economy.
The new rating is unlikely to have a large effect on the city’s investment projects or budgetary policy. The rating will lower borrowing costs for the city, but Williamsburg rarely finances its projects by issuing bonds, instead preferring to spend money acquired through the sales tax.
“I don’t think the rating is going to change our policy at all, because the rating means that what we are doing works,” Foster said.
According to Tuttle, the rating won’t change any of the city’s policies, but that does not mean the rating is meaningless.
“Once you become a AAA you don’t want to drop back to AA, so this will make the city look harder, and try to be worthy of that AAA rating,” he said.