Henrico seeks first quad-AAA bond rating, plans bond sales to fund infrastructure projects

For years, Henrico County has enjoyed a triple AAA bond-rating on its general obligation bonds – the highest possible rating of credit-worthiness from the three largest rating agencies, which typically translates into the lowest interest rates possible when the county sells bonds to fund large infrastructure projects. That saves the county, and its taxpayers, money on such projects.

Now, Henrico is hoping to become one of the first localities in the nation to enjoy a quad-AAA rating.

Ahead of a planned general obligation bond issuance this fall, the county invited a fourth rating agency (Kroll Bond Rating Agency) to take an in-depth look at its financial status. If all four agencies (Moody’s, Standard & Poor’s and Fitch Ratings are the others) issue an AAA rating, Henrico would become one of just a handful in the nation and the second in Virginia to earn that rating on its G.O. bonds from four major agencies. (Chesterfield County was the first in Virginia to do so when it obtained that rating earlier this summer from KBRA ahead of its own bond sale.)

“Each agency has a different methodology and philosophy behind their approach to ratings, so having another review just adds credibility for investors looking to buy Henrico bonds,” Henrico Finance Director Sheila Minor told the Citizen this week.

Henrico is planning to issue G.O. bonds totaling $88 million to help fund eight projects authorized by voters during the county’s 2022 bond referendum:

• the construction of a new version of Quioccasin Middle School ($60 million in funding from the planned bond sale);
• new drainage improvements ($7.5 million);
• the renovation of Johnson Elementary School ($5 million);
• the renovation of Jackson Davis Elementary School ($4.5 million);
• the replacement of Longan Elementary School ($4.5 million);
• the construction of a new animal adoption center in Short Pump ($2.7 million)
• the construction of Tuckahoe Creek Park Phase III ($2.5 million);
• the construction of Henrico Schools’ Environmental Education Center in Varina ($1.3 million).

Separately, the county also intends to issue Economic Development Authority bonds to help fund two projects:
• the construction of a new Social Services building ($33.5 million in funding from the planned bond sale);
• the replacement of its financial system ($11.5 million).

The latter two projects aren’t being funding through G.O. bonds because they are needs that arose after the county’s last bond referendum.

At its Aug. 12 meetings the Henrico Board of Supervisors will consider resolutions to authorize both both sales. Then, once it has the updated ratings in hand from the four bond-rating agencies, Henrico will take its bond package to the market, inviting investors to purchase those bonds.

The G.O. sale is expected to close Sept. 4, while the EDA bond sale is expected to close Sept. 24, Minor said. The county had been planning for a spring bond issuance, she said, but the markets were unsettled at the time and officials decided to wait until the fall.

EDA bonds for any locality are rated at least one “notch” lower on the bond-rating scale than are G.O. bonds from the same locality, simply because they are viewed as having a slightly higher degree of investor risk. For example, Henrico’s EDA bonds earned an AA+ earlier this year.

The county’s G.O. bonds have earned AAA ratings from S&P Global and Moody’s since 1977 and from Fitch since 1998, when that agency first issued it a rating.
Henrico’s last G.O. bond-issuance occurred in April 2024, when the county sold about $121.4 million worth of bonds at a 3.076% interest rate. Included in that issuance was initial funding for the Environmental Education Center, Quioccasin, Jackson Davis and Longan projects, as well as the animal adoption center and Tuckahoe Creek Park projects, among others.

Minor expects a G.O. bond rate slightly north of last year’s this time around, because of market changes, but said the rate still will be strong.

“We’re feeling very good,” she said. We’re going to get a strong rate relative to anyone else issuing that day, because we are a triple AAA [locality].”