Bonds are used in the Commonwealth of Virginia to finance the costs of long term capital improvements throughout the state. The Commonwealth does not use bonds to close budget gaps or fix cash flow problems. Virginia bonds are primarily used for new construction and improvements at our institutions of higher education, transportation and port facilities, schools and state park and correctional facilities. Investing in Virginia bonds supports these endeavors, and interest paid to bond holders is exempt from Virginia income taxation, and in most cases, federal income taxation.
The Commonwealth's general obligation bonds are currently rated AAA/Aaa/AAA by Fitch, Moody's and Standard and Poor's rating agencies respectively. Rating agencies focus on several key factors in assessing a state's credit quality: control of debt burden, economic vitality/diversity, fiscal performance, and administrative capabilities. Most of the Commonwealth’s appropriation supported bond programs, which require an annual appropriation for debt service, are rated one notch below the general obligation bonds at AA+/Aa1/AA+. This would include bonds issued by certain state authorities, such as the Virginia Public Building Authority and the Virginia College Building Authority.
Section 2.2-4902 of the Code of Virginia requires that bond ratings on any bonds issued by any agency or instrumentality of the Commonwealth and each political subdivision, including public authorities, districts, and each county, city or town, must be provided by a bond rating agency approved by the State Treasurer.