Fitch Ratings has upgraded the Town of Prescott Valley’s bond rating to AA+ from AA-.
The ratings are related to any future bond debt the town issues, and enables Prescott Valley to borrow money at a lower rate.
Outlined in a report released this week, Fitch based the upgrade on a number of positive financial trends.
The town’s management of its debt, revenues and spending all contributed to the ratings jump.
Since July 1, 2008, the town has reduced its principal and interest bond debt by $72 million. Virtually all of Prescott Valley’s debt is scheduled for repayment within 10 years.
Fitch expects that Prescott Valley will solidly weather a normal economic downturn, and in fact, would be able to withstand as much as a 60 percent drop in revenue and still meet its bond obligations. The largest actual cumulative decline in historical revenues in the town is 25.3 percent from fiscal 2007-2011, during the Great Recession.
Bob Casillas, bond underwriter for the town, said the ratings increase is “positive news indeed” for Prescott Valley.
“This is a full ratings notch upgrade,” Casillas said. “It certainly reflects on Prescott Valley’s strong management, starting with its elected officials and the Town’s management team. The Town has a proactive approach and plans for contingencies, recognizing both bad economic times and good times,” he said.
Casillas added that the stability and longevity of both the town council and the management team contributed to the ratings boost.
“Fitch acknowledged the long tenure and consistency of Prescott Valley’s leadership over the years,” he said. “Experience really matters. The Town has historically exhibited fiscal prudence, and that is reflected in the ratings upgrade.”
The Fitch report states that the current growing population and economic expansion in Prescott Valley should continue to exceed the national rate, and expects the town’s spending to keep pace with or stay below the pace of its revenues.
Prescott Valley’s 2.83 percent sales tax rate is close to the state’s median, which ranges from .25 percent to 5.3 percent. Additionally, the town is rebuilding the reserves which had declined considerably during the Great Recession.
The Town’s pension liability also played into the rating, with Fitch deeming it “modest.” With the exception of police, employees participate in the town’s defined contribution plan.
Vice Mayor Rick Anderson said the ratings increase is “wonderful news.”
“This justifies all the faith we’ve had in our Town of Prescott Valley,” he said.
Council Member Lora Lee Nye added that she is confident the Town Council and staff’s diligence in financial matters and long term planning lead to the ratings boost.
“It is gratifying to have our policies and practices applauded by an outside agency of the quality of the Fitch rating service,” said Larry Tarkowski, Prescott Valley Town Manager. “This is confirmation that the town’s staff and elected officials are very responsibly handling the finances of the community.”