The City of Cambridge has retained its noteworthy distinction of being one of approximately 33 municipalities in the U.S. with AAA ratings from each of the nation's three major credit rating agencies. Each year since 1999, the City has received these ratings from Moody's Investors Service, Standard & Poor's and Fitch Ratings.
The AAA ratings were in conjunction with the City's sale of $34.9 million in General Obligation bonds, which takes place on February 18, 2014. This sale will finance capital projects such as King Elementary School renovations, sewer reconstruction, improvements to the Harvard Square tunnel, open space improvements at Cambridge Common, street reconstruction and Kendall Square surface improvements.
“Based on this ongoing recognition from the rating agencies, the City Council should be recognized for adopting and maintaining sound fiscal policies, and city department heads and staff should be commended for their commitment to prudently managing their budgets and programs,” said City Manager Richard C. Rossi. “The City is fortunate to have such a strong and dedicated team.”
What does the AAA Rating Mean for Taxpayers?
Over the last 15 years, the AAA rating has enabled the city to finance a variety of major capital projects at very favorable rates that, in turn, result in savings to taxpayers. Major projects have included construction of the Walter J. Sullivan Water Purification Facility, the Cambridge Public Library renovation and expansion, the state-of-the-art Robert W. Healy Public Safety facility, the Cambridge War Memorial Recreation Center renovation, the Mayor Sheila Doyle Russell Youth Center, and the Cambridge Rindge & Latin School Renovation.
“Everything we do is geared toward preparing this city for the next 75-100 years,” said City Manager Richard C. Rossi. “We’ve built great reserves to keep the community well insured. Our fiscal strategies and management practices have tangible impacts on Cambridge taxpayers. For example, approximately 75% of residential taxpayers saw a reduction, no increase or an increase of less than $100 in their FY14 tax bill. We have one of the lowest city tax rates in the Commonwealth. This is possible because of the collaboration that occurs between the City Council and the City Administration around sound fiscal planning.”
The following are excerpts from the Rating Agencies reports:
Moody’s Investors Service
Moody’s highest long-term rating reflects the sizeable, diverse and stable tax base, which is anchored by world renowned higher education institutions and a growing research and development sector. Also incorporated into the Aaa rating is a historically stable financial position with significant reserve levels, a strong professional management team and a favorable debt profile supported by healthy enterprise systems.
Assignment of the stable outlook incorporates Moody’s expectation that the city will maintain strong credit quality given its healthy financial position, supported by management’s demonstrated ability to adhere to formal fiscal policies. The outlook also reflects the stable tax base which is supported by extremely stable higher education institutions and ongoing commercial development.
Key rating drivers include:
Exceptional financial management and planning are demonstrated by the city’s strong financial position. The city continues to strategically use general fund reserves to keep tax levy increases at moderate levels. Reserve levels remain strong. The stable presence of higher education, healthcare, biotechnology and life sciences industries supports the well diversified economy with low unemployment. Ongoing development within the city has resulted in growth in assessed value, providing the city with continued tax levy flexibility for operations and debt service. Debt levels are moderate and expected to remain manageable, aided by the city’s rapid rate of amortization. Pension and other post-employment benefit (OPEB) costs are manageable.
Standard & Poor’s Corporation
The ratings reflect our assessment of the city's:
- Strong and dynamic local economy. Economic expansion within the city continues – particularly in the areas of biotechnology and software development- due, in part to its commitment to planned development;
- Very strong budgetary performance, which takes into account a revenue stream we consider stable;
- Very strong liquidity providing very strong cash levels to cover both debt service and expenditures;
- Very strong management with strong financial policies; and
- Strong debt and contingent liabilities position.
Standard & Poor's considers Cambridge's financial management practices "strong" under its Financial Management Assessment methodology, indicating practices are strong, well embedded, and likely sustainable.