Ahead of budget talks that begin on Aug. 8, the city of Jacksonville announced that Fitch Ratings upgraded the city’s credit rating.
In an Aug. 6 release, the city said Fitch boosted its rating two levels, from AA- to AA+. The release also said S&P Global Ratings and KBRA reaffirmed ratings of AA for the city, and all three agencies “indicated a stable outlook.”
The agencies “agree that Jacksonville is in a strong financial position after conducting an unbiased and apolitical analysis of the City’s current and future fiscal outlook,” the release said.
The ratings are a measure of the city’s credit quality, or the ability to make timely payment of principal and interest on bonds. Higher bond ratings generally translate to lower interest rates for borrowing, which saves tax dollars in a way similar to a higher credit rating for a homeowner yields more favorable terms for a mortgage.
All three agencies are based in New York City. Fitch and S&P are considered among the nation’s three major ratings agencies for governmental organizations and corporations, along with Moody’s.
The city’s release indicated the ratings agencies were aware that the proposed 2024-25 city budget includes the city’s $775 million contribution to its “Stadium of the Future” deal with the Jacksonville Jaguars.
Under the City Council-approved stadium agreement, the city’s funding method largely involves revenue generated by the Better Jacksonville Plan half-cent sales tax approved by Duval County voters in 2000.
The city was going to end the Better Jacksonville Plan sales tax in 2026 instead of 2030, rolling the plan’s final projects into the Capital Improvement Plan, which is largely funded through borrowing.
The city will instead maintain the 2030 sunset for the Better Jacksonville Plan, freeing up Capital Improvement Plan money for the stadium renovations.
“Jacksonville continues to deliver strong financial results and credit rating agencies appreciate our diversified economy, fiscal responsibility and investment in infrastructure and development projects,” Mayor Donna Deegan said in the release. “This credit rating upgrade is a big deal for our city. It means savings for taxpayers through lower interest costs and money back into our coffers that can be spent on services for citizens.”
In July, Deegan delivered a $1.9 billion proposed budget to Council that contained $47.2 million in expenditures from the city’s operating reserve funding. That reserve spending drew concerns from Council member Ron Salem, the chair of the Council Finance Committee, who noted it was several times higher than use of reserves in budgets over the last several years.
In the past 12 Council-approved budgets, the average amount of reserve spending was $9.28 million.
Deegan said the $47.2 million would still leave the city with twice as much cushion in its reserves as recommended in city ordinance.
In Fitch’s report, the agency based its upgrade partly on the “expectation for available reserves to be maintained at 10% of general fund spending or higher,” the city release said.