Norfolk Advances with $525M Bond Initiatives for Growth and Stability

The City of Norfolk is taking significant steps to invest in its future and enhance its financial stability through two major bond offerings: a $225 million General Obligation Bond offering for Capital Improvement Projects (CIP) and a $300 million General Obligation Refunding Bond offering aimed at refinancing existing debt. These initiatives underscore the City's commitment to improving infrastructure, supporting community development, and optimizing its financial position.

Boosting Infrastructure and Community Projects with $225 Million in New Bonds

Norfolk plans to issue up to $225,000,000 in General Obligation Bonds to address the cash flow needs of its previously authorized Capital Improvement Programs. These crucial funds will be allocated across various sectors including General Capital, Wastewater, Waste Management, Storm Water, and Parking projects.

The projects identified for funding are diverse and designed to directly benefit the safety, health, welfare, and prosperity of Norfolk's inhabitants. They include:

• School maintenance and improvements
• Road and infrastructure maintenance and sustainability
• Neighborhood projects, such as the St. Paul’s area redevelopment
• Parks and recreation projects, including a combined recreation and library facility at NFWC
• Jail improvements
• Enhancements at Nauticus and the Half Moone Cruise Terminal
• Critical flooding/drainage and various storm water improvements
• Cruise terminal facilities projects
• Parking projects, including a new garage
• Various waste management projects

The bond sale is envisioned as a negotiated sale with an underwriting team, a strategy often chosen during periods of high market volatility or for complex bond structures. The 2025 General Obligation Bonds are considered complex due to a sensitive refinancing opportunity and the likely inclusion of multiple series to accommodate both tax-exempt and taxable statuses for various capital projects.

Financially, Norfolk anticipates low borrowing costs thanks to its strong credit rating. The total new debt, including issuance costs, will not exceed $225,000,000. The bonds will feature a true interest cost not exceeding 6.5% per annum for fixed-rate bonds and an initial rate for variable-rate bonds also not exceeding 6.5%. The final maturity for any series will be no more than 31 years from its dated date. The City's full faith and credit are irrevocably pledged for payment, backed by the Council's authority to levy taxes if other funds are unavailable.

The City Manager, in consultation with the Director of Finance, will determine specific details like the principal amount, interest rate type, method of sale, and payment dates within the established parameters. A public hearing regarding the issuance of these Bonds was held on September 9, 2025. Public notices were published in The Virginian Pilot and on specific public notice websites on August 26, 2025, and August 28, 2025. Should market conditions be unfavorable for long-term financing, the City Manager is authorized to issue short-term notes for up to five years.

Strategic Refinancing with $300 Million in Refunding Bonds

In parallel, Norfolk is also authorizing the sale of up to $300,000,000 in General Obligation Refunding Bonds. The primary purpose of these bonds is to refinance previously issued General Obligation Bonds and other outstanding obligations, such as the General Obligation Capital Improvement Notes and the 2007 Variable Rate Bonds. This strategy aims to achieve debt service savings by capitalizing on lower interest rates, much like refinancing a mortgage.

This authorization also allows the City to pay off outstanding balances on its revolving Line of Credit, effectively converting interim financing to long-term debt. Due to the volatility of the bond market, the ordinance is crucial for allowing the City to act quickly when refunding opportunities arise.

The 2017 Tax Cuts and Jobs Act eliminated tax-exempt advance refunding, leading the municipal market to adopt alternative methods. While taxable advance refunding was used by Norfolk from 2019-2021, the rise in interest rates since March 2022 has made tender refundings an increasingly popular strategy for generating savings on bonds that cannot otherwise be refunded efficiently. This ordinance explicitly authorizes the City to consider tender or exchange transactions. In a tender transaction, the City would offer to buy back existing bonds for debt service savings.

The actual amount of refunding bonds and any savings generated will be market-driven and dependent on existing bondholder participation in tender offers. The City intends to execute a tender only if it meets its savings objectives. For refinancing the Notes or the 2007 Variable Rate Bonds, the true interest cost of fixed-rate refunding bonds will not exceed 6.5% per annum, and initial rates for variable-rate bonds will also stay below 6.5%. The final maturity of refunding bonds will not be later than the last fiscal year in which the refunded prior obligation matures. The City's full faith and credit are irrevocably pledged for these bonds.

Unlike new bond issuances for capital projects, no public hearing is required for refunding bonds under the Code of Virginia. This refunding authorization, which supersedes a previous ordinance, is available through June 30, 2027, though any bonds sold before this date under a "forward" refunding structure may be issued later.

Both bond offerings have been carefully coordinated with the Department of Finance and the City Attorney's Office, and have been reviewed and approved by the Director of Finance and the City Manager. These dual initiatives demonstrate Norfolk's proactive and strategic financial management to enhance public services and ensure long-term fiscal health.