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December 2, 2025
City of Virginia Beach, Virginia
Financial State of the City
➢Davenport & Company LLC (“Davenport”) serves as Financial Advisor to the City of Virginia Beach (the
“City”).
➢Davenport serves as Financial Advisor to the City in the following ways, amongst others:
–Reports to the City Council and Senior City Leadership;
–Complements City Staff with annual Budgetary Planning, Capital Planning, and general Financial
Planning; and,
–Interacts with the National Credit Rating Agencies, Banks, and Brokerages on behalf of the City.
➢Davenport does not:
–Determine which projects will be financed;
–Underwrite any bond issues or lend the City any money; or
–Hold a financial interest in how a project is funded.
➢As in prior years, Davenport has prepared a briefing outlining the City’s overall financial standing, debt
capacity, and preliminary capital planning.
December 2, 2025 Financial State of the City 1
Introduction
December 2, 2025 Financial State of the City 2
Credit Rating Overview
➢The City enjoys ‘Aaa’ credit ratings from all three of the National Credit Rating Agencies. These credit
ratings were affirmed as part of the issuance process in 2024. ‘Aaa’ credit ratings are the highest
possible credit ratings a local government can achieve.
➢Credit ratings serve as a barometer for the Financial, Economic, Demographic, and Management standing
of the City.
Top Tier “Highest Possible
Rating”
2nd Tier “Very Strong”
3rd Tier “Strong”
4th Tier “Adequate
Capacity to Repay”
5th – 10 th Tiers “Below
Investment Grade”
Considered
Investment
Grade
Below
Investment
Grade
Moody's S&P
Aaa AAA
Aa1 AA+(Highest)
Aa2 AA (Middle)
Aa3 AA-(Lowest)
A1 A+(Highest)
A2 A (Middle)
A3 A-(Lowest)
Baa1 BBB+(Highest)
Baa2 BBB (Middle)
Baa3 BBB-(Lowest)
BB, B, CCC, CC, C, D
Fitch
AAA
AA+
AA
AA-
A+
A
A-
BBB+
BBB
BBB-
December 2, 2025 Financial State of the City 3
Rating Agency Commentary | Moody’s Report May 3, 2024
➢“The credit profile of Virginia Beach, VA (Aaa stable) is sound, and reflects the city's solid economy,
anchored by several military bases, and steady tourism.”
➢“Credit Strengths
–Sizeable and diverse local economy that benefits from stabilizing institutional presence.
–Healthy property wealth levels and above-average growth of taxable base .
–Comprehensive financial policies and conservative budgeting practices.”
➢“Credit challenges
–Reserve and liquidity levels are below those of similarly rated cities nationwide (as a percentage of
revenues).
–Some exposure to funding reductions/cuts at the federal level, specifically department of defense.”
➢“The city's financial position is strong and is expected to remain so given strong revenue growth,
conservative budgeting and prudent management of expenditures . Reserves have largely increased in line
with revenues and the city's operations, net of transfers to the capital fund, have consistently been
structurally balanced.”
➢“Virginia Beach's long-term liabilities are manageable and despite a robust six-year capital improvement
program (CIP), are expected to remain so given management's strict adherence to formal debt policies as
well as rapid amortization of principal.”
Source: Moody’s Rating Report published as of May 3rd, 2024.
December 2, 2025 Financial State of the City 4
Rating Agency Commentary | S&P Report May 2, 2024
➢S&P affirmed the City’s ‘AAA’ (Stable) credit rating.
➢“The city's large, diverse, high-value property tax base and, what we consider, strong finances, achieving
balanced current fund operations, support the rating.”
➢The rating reflects S&P’s assessment of the following factors for the City of Virginia Beach:
–“Affluent, expanding community within the Virginia Beach-Norfolk-Newport News metropolitan
statistical area with several ongoing housing; industrial; and commercial projects , supporting our view
of a very strong economy;
–Very strong management with strong financial-management policies, practices under our Financial
Management Assessment (FMA) methodology, with a focus on long-term planning, and very strong
Institutional Framework score;
–Positive operations expected in fiscal 2023 and projected for fiscal 2024, supporting very strong
budgetary flexibility and liquidity; and
–Manageable debt and robust roughly $1.7 billion capital-improvement plan that focuses on resiliency
and other necessary capital projects--Pension and other postemployment benefit (OPEB) costs remain
manageable and do not pressure operations.”
Source: S&P Rating Report published as of May 2nd, 2024.
December 2, 2025 Financial State of the City 5
Rating Agency Commentary | Fitch Report May 6, 2024
➢“The City's 'AAA’ Issuer Default Rating and GO rating reflects the city 's historically strong operating
performance…Fitch's expects Virginia Beach will continue to maintain healthy financial flexibility throughout
economic cycles.”
➢“Demographic and economic trend metrics are considered 'strong' by Fitch, as demonstrated by a low
unemployment rate relative to the national average, high level of educational attainment and median
household income levels.”
➢“The ratings also incorporate the city's relatively stable revenue and population trends and midrange long-
term liability burden.”
➢“The ratings additionally reflect the application of one positive analytical factor that recognizes the city's role
as the center of an important and growing MSA in the Commonwealth of Virginia that makes a notable
contribution to the national economy.”
➢“Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
–An approximate 40% increase in long term liabilities without a commensurate growth in personal
income or governmental resources.
–Although not expected, a sustained decline in available general fund balance below 7.5%of spending
would reduce the city's financial resilience assessment to 'aa' from 'aaa'.
–A material erosion of the city's demographic and economic trends and levels prospects.”
Source: Fitch Rating Report published as of May 6th, 2024.
➢The City has experienced multiple years of strong financial results driven by the health, stability, and growth
of the national and regional economy.
➢General fund revenues have grown roughly 5.0% annually, on average, over the last six fiscal years
(FY 2019 – FY 2024).
➢General fund expenditures have grown roughly 4.7% annually, on average, over the last six fiscal years
(FY 2019 – FY 2024).
➢The City’s Unassigned Fund Balance continues to be in compliance with the City’s Adopted Financial
Policies.
➢As the national economic outlook continues to evolve, it will continue to be integral to maintain structural
balance (i.e. recurring revenues meeting / exceeding recurring expenditures).
December 2, 2025 Financial State of the City 6
Financial Management Summary
December 2, 2025 Financial State of the City 7
Unassigned Fund Balance – Financial Policy Compliance
➢Following the Government Finance Officers Association recommendation that general purpose
governments maintain Unassigned Fund Balance in their General Fund of no less than 5% to 15% of
regular General Fund operating revenues, the City shall maintain an Unassigned Fund Balance of 8% to
12% of the following year’s projected revenues . This level equates to approximately one month of
operating expenses.
➢The projected Unassigned Fund Balance on June 30, 2025, for the General Fund is $179.0 million or
11.5% of the budgeted FY 2026 revenues, which is within the City’s fund balance policy of 8 – 12 %.(1)
Unassigned Fund Balance Policy
Source: Historical City Audits and Budgets.
(1) FY 2025 estimates reflects draft audited financials. Preliminary, subject to change.
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
2019
Audited
2020
Audited
2021
Audited
2022
Audited
2023
Audited
2024
Audited
2025
Projected
Unassigned as a % of Revenues
Reserve Policy - Lower Bound (8%)
Reserve Policy - Upper Bound (12%)
December 2, 2025 Financial State of the City 8
Peer Comparative – Unassigned Fund Balance vs. Revenue
Source: Respective City 2024 Audits. (1) FY 2025 projected estimate. Preliminary, subject to change.
Note: Revenues comprise of General Fund Revenues plus School Fund Revenues (excluding Transfers from the General Fund).
Credit Rating Key: (Moody’s/S&P/Fitch)
11.5%
19.6%
8.0%
9.7%
11.6%
17.5%
21.6%
24.4%
25.5%
45.8%
0%5%10%15%20%25%30%
Virginia Beach¹
Hampton Roads Cities Median
Chesapeake (Aaa/AAA/AAA)
Norfolk (Aa2/AAA/AA+)
Newport News (Aa1/AA+/NR)
Hampton (Aa1/AA+/AA)
Poquoson (Aa2/AAA/NR)
Suffolk (Aaa/AAA/AAA)
Portsmouth (Aa2/AA+/AA-)
Williamsburg (Aa1/AAA/NR)
Unassigned Fund Balance vs. Revenues
December 2, 2025 Financial State of the City 9
Tax-Supported Debt Profile
Source: Davenport Debt Model.
➢As of FY 2026 (July 1, 2025), the City had roughly $1.0 billion of Tax-Supported debt outstanding (including
Flood Protection Program debt).
➢All of the City’s outstanding debt is fixed-rate.
➢The City’s 10-year Payout Ratio is approximately 70%.
$-
$20.0
$40.0
$60.0
$80.0
$100.0
$120.0
$140.0
$160.0
2026202720282029203020312032203320342035203620372038203920402041204220432044Millions Principal Interest
December 2, 2025 Financial State of the City 10
Debt Management Financial Policies
➢The City has several Debt Management Financial Policies which were most recently updated in the early
part of calendar year 2023.
➢These policies are summarized below:
➢In line with the City’s updated policy, the debt policies have been reviewed against rating agency criteria
and industry best practices, and continue to reflect recommended metrics and policy levels.
Policy / Metric Existing Policy
Net Debt to Assessed Real Estate Value Not to exceed 3.0%.
Debt Service to General Government
Expenditures Not to exceed 10.0%.
Fixed Costs to General Government
Expenditures Not to exceed 20.0%.
10-Year Payout Ratio Remain above 50%.
December 2, 2025 Financial State of the City 11
Debt Capacity | Issuance Assumptions
➢The table below highlights the estimated amount and timing of debt for the City’s three (3) tax-supported
borrowing programs in support of the City’s CIP over the next six fiscal years. The debt issuances translate
into debt service payments which affect the City’s operating budget.
➢The issuance schedule is directly affected by the City’s cash flow spending to fund approved CIP projects.
The estimated schedule was developed in concert with City Finance & Budget Staff using historical results
and future projections.
FY Charter PFRB Flood Total
2026 162,768,357$ -$ -$ 162,768,357$
2027 - 133,868,048 100,000,000 233,868,048
2028 100,000,000 - - 100,000,000
2029 - 139,495,411 149,500,000 288,995,411
2030 195,820,635 - - 195,820,635
2031 - 158,347,083 200,000,000 358,347,083
Total 458,588,992$ 431,710,542$ 449,500,000$ 1,339,799,534$
December 2, 2025 Financial State of the City 12
Debt Capacity | Financial Policy Projections
Debt vs. Assessed Value Debt Service vs. Budget
Estimated results are preliminary, subject to change.
Note: Assessed Value assumes the following annual growth rates: FY27 – 2.8%, FY28 – 3.2%,
FY29 – 3.2%, FY30 – 2.0%, FY31 – 2.0%, and 3.0% thereafter.
Note: Budget assumes the following annual growth rates: FY27 – 1.36%, FY28 – 2.56%, FY29 –
2.59%, FY30 – 2.03%, FY31 – 2.04%, and 3.0% thereafter.
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
2026 2027 2028 2029 2030 2031 2032 2033
Existing Tax-Supported Debt vs. AV Projected Charter Debt vs. AV
Projected PFRB Debt vs. AV Projected Flood Debt vs. AV
Debt Policy Limit (3.0%)
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
2026 2027 2028 2029 2030 2031 2032 2033
Existing Tax-Supported DS vs. Budget Projected Charter DS vs. Budget
Projected PFRB DS vs. Budget Projected Flood DS vs. Budget
Debt Service Policy Limit (10%)
December 2, 2025 Financial State of the City 13
Debt Capacity | Financial Policy Projections (cont.)
Fixed Costs Ratio 10 -Year Payout Ratio
Estimated results are preliminary, subject to change.
Note: Budget assumes the following annual growth rates: FY27 – 1.36%, FY28 – 2.56%, FY29 –
2.59%, FY30 – 2.03%, FY31 – 2.04%, and 3.0% thereafter. Pension and OPEB Expenses are
assumed to grow annually at 3.5%.
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
2026 2027 2028 2029 2030 2031 2032 2033
Existing Tax-Supported DS Projected Pension Cost
Projected OPEB Cost Projected Charter DS
Projected PFRB DS Projected Flood DS
Fixed Costs Policy Limit (20%)
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
2026 2027 2028 2029 2030 2031 2032 2033
Existing 10 Year
Payout Ratio
Projected 10 Year Payout Ratio
Minimum 10 Year Payout Ratio (50%)
Note: Projected 10-Year Payout Ratio assumes 20-year issuances with level principal repayment.
Plan of Finance for FY 2026
Charter Bonds
City of Virginia Beach, Virginia
December 2, 2025 Financial State of the City 14
➢The upcoming General Obligation Bond issuance will provide financing for both General and School capital
expenditures.
➢The City is projected to remain in compliance with its Debt Management Policies following the issuance of
the General Obligation Bonds.
➢The General Obligation Bonds will be financed over 20 years utilizing a level principal repayment structure,
consistent with the City’s historical practices.
➢The estimated debt service payments have been factored into the City’s budget planning.
December 2, 2025 Financial State of the City 15
Plan of Finance
2026 General Obligation Bonds
Estimated Uses of Funds*
115,508,534$ General CIP Projects
47,259,823 School CIP Projects
162,768,357$ Total General Obligation Financing
*Preliminary, subject to change.
➢Davenport routinely reviews and monitors the City’s existing debt profile for refinancing opportunities.
➢Interest rates are at historically favorable levels.
➢Davenport has identified the potential opportunity to refinance several series of outstanding General
Obligation Bonds for debt service savings purposes.
➢The City would have the potential opportunity to refund the outstanding debt in order to:
✓Reduce the interest rate on the bonds to achieve debt service savings.
✓Without extending the final maturity of the bonds.
➢The industry standard benchmark for a successful refinancing is 3.0% Net Present Value Savings as a
percentage of the par amount of the bonds refunded.
✓The General Obligation refunding candidates equate to approximately $62.9 million outstanding –
3.0% Net Present Value equates to approximately $2.9 million in debt service savings.
➢The refundings are subject to current market conditions on the day of the sale(s) and will only be issued if
savings thresholds are met.
December 2, 2025 Financial State of the City 16
Plan of Finance (cont.)
➢The City’s financial standing is very strong as described by the independent credit rating agencies.
➢The City is in the process of undertaking a generational amount of capital investment as evidenced by the
Flood Protection Program as well as capital projects affected by inflationary pressures, trade policy, etc.
➢Based on current assumptions, the City has additional debt capacity (as measured against the City’s
adopted Debt Management Financial Policies), however, the repayment of the incremental additional debt
(i.e. debt affordability) will need to be pro-actively addressed during the annual budget process.
➢A key component of maintaining the strength and sustainability of the City’s finances while undertaking its
capital program will be revenue growth commensurate with, at a minimum, debt service and expenditures.
➢Davenport, in concert with the City’s Senior Administration, will continue to monitor and evaluate the City’s
debt capacity and debt affordability as City Council determines its capital funding priorities.
December 2, 2025 Financial State of the City 17
Concluding Observations
December 2, 2025 Financial State of the City 18
Next Steps
Timing Action
Tuesday, December 2, 2025 ▪Davenport to present Financial State of the City briefing to City
Council.
Balance of 2025 ▪City Council to provide feedback and request any supplemental
additional information from City Staff and Davenport.
January 6, 2026
▪City Council to consider approval of the 2026 General Obligation
Bonds via authorizing resolution prepared by the City’s Bond
Counsel.
Balance of January, 2026 ▪City Council Winter Retreat.
February/March, 2026 ▪Davenport to advise the City on the issuance of its 2026 General
Obligation Bonds.
Spring, 2026
▪Davenport to analyze additional capital funding scenarios based on
direction received from City Council and Senior City Leadership (as
required).
Appendix
City of Virginia Beach, Virginia
December 2, 2025 Financial State of the City 19
December 2, 2025 Financial State of the City 20
Key Drivers to a Credit Rating
[Moody’s = 10% / S&P = 20%]
Financial Forecasting
and management
Consistent and prudent
budgeting practices
Range and growth of services
provided in relation to
capacity to provide services
Adherence to long-range financial
planning and policies
Revenue & Expenditure
structure and patterns
Annual Operating & Budgetary
performance
Financial flexibility/Fund
Balance position
Long-Term Financial Plan
Nature of the pledged
security & debt structure
Balance between
accelerated debt issuance and
under-investment in capital
facilities
Debt Burden measured against:
Tax Base & Total Budget
Demographic Characteristics
Tax Base
Industry Mix & Composition
Local and Regional
Growth patterns
[Moody’s = 30% / S&P = 20% /
Fitch = 44%]
Note: %’s are from Moody’s updated methodology November 2022/ S&P updated methodology September 2024 / Fitch updated methodology April 2024.
[Moody’s = 30% / S&P = 20% /
Fitch = 21%]
[Moody’s = 30% / S&P = 40% /
Fitch = 35%]
Economic
Base
Financial
Performance
& Flexibility
ManagementDebt
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Version 01.01.2025 HP | AS | KL | DR
Financial State of the City
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21December 2, 2025