Top American credit rating agency, Fitch Ratings Inc., announced it upgraded the City of Clarksville’s new and outstanding general obligation (GO) bonds to ‘AA+’ with Outlook Stable from ‘AA’ on March 17.
In the press release issued by Fitch, the agency reported the upgrade is based on the economic expansion and diversification rooted in the rapid population and tax base growth taking place within city limits. Fitch is confident in the City’s ability to maintain a strong gap-closing capacity based on the City’s history of strong levels of reserves, manageable fixed carrying costs, and demonstrated willingness to raise revenues.
"The City's Finance and Revenue Department, led by Laurie Matta, our chief financial officer, has worked hard to ensure taxpayers' money is well managed and invested in our priorities,” Mayor Joe Pitts said. “The upgrade from Fitch Ratings is a testament that we’re getting a substantial result for the taxpayers while moving Clarksville in the right direction for our future growth."
The upgrade from Fitch comes after Moody’s Investors Service released on March 14 the City’s Aa2 rating, referencing the same GO bonds. The upgrade from Fitch and assigned Aa2 rating from Moody’s reaffirms the City’s solid financial position with a healthy reserve and liquidity levels.
“We are excited to receive this upgraded rating,” Matta said. “Anytime we receive a rating increase, it’s a benefit to the citizens of Clarksville. With this increased rating, we will be able to finance and refinance debt more competitively, ensuring our taxpayers’ money is utilized most efficiently.”
To evaluate the rating debt for the City, Fitch used four key drivers:
General fund revenues primarily consist of property taxes and local and state shared sales taxes. Fitch expects general fund revenue growth to continue to exceed the rate of national GDP due to ongoing economic development and expected growth in population. The city has a high independent legal ability to raise property tax revenues without limitation.
Fitch anticipates that expenditure growth will track or slightly exceed the pace of revenues. Moderate carrying costs and a high degree of labor flexibility underlie the city's solid expenditure flexibility.
The city's long-term liability (LTL) burden is low, at about 6%, compared to personal income. Fitch expects the city's liability burden to remain low due to manageable debt plans and a modest pension burden.
Fitch expects the city to maintain a superior level of fundamental financial flexibility throughout economic cycles, supported by its superior inherent budget flexibility, low revenue volatility, and healthy reserve levels.
For more information on the Fitch Ratings for the City of Clarksville, visit https://www.fitchratings.com/entity/clarksville-tn-99969.