City Receives AAA Credit Rating from Fitch

Communications Director

Eric Vreeland
evreeland@knoxvilletn.gov
(865) 215-3480

400 Main St., Room 654A
Knoxville, TN 37902

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City Receives AAA Credit Rating from Fitch

Posted: 12/06/2010
The Fitch Rating Service affirmed the City of Knoxville's 'AAA' credit rating - the highest possible rating from the agency - on Monday.

In a release announcing the affirmation Fitch noted that the city's "Financial management is strong highlighted by prudent budget practices and robust reserve levels." Fitch analysts also credited the city's moderate debt burden, consistent operating surpluses and the benefits of being part of a "broad and diverse economy anchored by stable government and higher education," as factors in its decision.

All three of the major bond rating agencies -Fitch, Moody's Investors Services and Standard & Poor's - upgraded the city's credit rating since 2008 despite difficult economic conditions that have left some governments struggling to maintain services. Both Moody's and Standard & Poor's have given the city its second highest credit rating.

The City of Knoxville has reported operating surpluses during each of the past six years, hasn't had a tax increase since 2004 and hasn't experienced layoffs or reductions in services even though the city has reduced its operating budget during each of the last three years. The city's general fund balance has grown from $18 million to more than $50 million since 2004.

"We're very pleased to maintain the AAA rating from Fitch," said Mayor Bill Haslam, who became Knoxville's mayor in December of 2003. "It's the result of disciplined budgeting, careful financial management and a lot of hard work by folks in the administration and City Council."

"We've had to deal with some challenging economic conditions, particularly during the past two years, and it's always rewarding when an organization like Fitch recognizes that good work," he added.

The high bond ratings mean the city should be able to borrow money at a lower interest rate and should make the city's bonds more attractive to potential investors. Knoxville, however, has not borrowed money in several years and does not anticipate issuing any bonds in the near future.

Fitch's ratings are arranged on a scale from 'AAA' (the best rating) to 'D' (the worst), with several categories for each letter in between, for example AA+, AA, A, A-, BBB+, etc.

The Fitch release notes that Knoxville, "serves as the economic anchor of Northeastern Tennessee. The economy is diverse and relatively resilient with the government and higher education sectors providing long-term stability to the area."

It also states that manufacturing continues to be important to the city and that Knoxville's unemployment numbers have declined reflecting a growth in employment.