Cambridge Awarded AAA Ratings for 20th Year

The City of Cambridge has retained its noteworthy distinction of being one of approximately 33 municipalities in the U.S. to earn 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.

“I want to acknowledge the City Council’s leadership for adopting and maintaining sound fiscal policies, and City department heads and staff for their commitment to prudently managing their budgets and programs,” said City Manager Louis A. DePasquale. “One of the many factors contributing to the City receiving these ratings is our strong and dedicated team.”

The AAA ratings are in conjunction with the City's sale of $90.6 million in General Obligation bonds. These sales will finance capital projects such as King Open and Cambridge Street Upper Schools and Community Complex, sewer reconstruction, street and sidewalk reconstruction, and other municipal and school building design and renovations.

Over the last 20 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. 

As the City undertakes a significant increase in debt issuance over the next few years to fund its school rebuilding program, the AAA rating will play a significant role in enabling the City being to secure the most favorable interest rates. This is especially important as the City embarks on funding its third school project (Tobin Montessori and Vassal Lane Upper Schools) with an estimated cost of $250 million. Overall, including the Tobin School project, the City is projected to spend a total of $505 million for the three school projects. In addition, the bonding schedule includes significant obligations for renovations to Fire Headquarters and other City Buildings.

“We take a long-term approach to our fiscal planning and our fiscal strategies and management practices have real impacts on Cambridge taxpayers,” said City Manager Louis A. DePasquale. “We’ve built significant reserves which in part serve as the City’s insurance policy, and our financial success is only possible because of the collaboration that occurs between the City Council and the City Administration.”

The following are excerpts from the Rating Agencies reports (Download reports):  

Moody’s Investors Service

Cambridge, Massachusetts (Aaa stable) benefits from a sizeable and diverse tax base that continues to grow significantly year over year. The city's economy is driven largely by the presence of Harvard University (Aaa stable) and Massachusetts Institute of Technology (MIT, Aaa stable) and the impressive research and development sector. The city's financial position is strong with very healthy liquidity and reserves that are maintained by strong fiscal management. Both the debt burden and long term liabilities for pension and OPEB are conservatively managed and will remain manageable over the near term.

Credit strengths cited include:

• Large and diverse tax base anchored by institutional presences and robust commercial sector;
• Healthy financial position guided by formal policies;
• Strong fiscal management;
• Ample operating flexibility with excess levy capacity under Proposition 2½; and
• Expected to fully fund pension liability by 2026

Fitch Ratings

The city's 'AAA' GO bond rating and Issuer Default Rating (IDR) reflect Fitch Ratings’ expectation for Cambridge to maintain a high level of financial flexibility through economic cycles, consistent with a history of strong operating performance and budget controls. The ratings further reflect the city's wealthy and growing property tax base, moderate expenditure growth and its demonstrated ability to reduce expenditures during economic downturns.

Fitch expects long-term liabilities to remain low based on the city's manageable capital needs, rapid principal amortization, continued growth in economic resources and a practice of fully funding actuarially determined pension contributions.

Standard & Poor’s Corporation

The rating reflects our opinion of Cambridge's extremely strong property tax base that continues to grow within the Boston metropolitan statistical area (MSA), supporting continued positive budgetary performance that has led to improved reserves. The city has a favorable debt profile with the ability to absorb additional debt plans.

Key factors cited include management's:

• Conservative revenue and expenditure assumptions in the budgeting process that focus on five years of historical information;
• Quarterly reports on budget-to-actual results and investments to the city's finance and investment committees, respectively;
• Long-term financial plan with credible assumptions;
• Five-year capital plan with identified funding sources, which it is expanding to include a municipal-facilities-improvement plan;
• Robust debt and investment policy it reviews at least annually to demonstrate adherence; and
•  Reserve policy that requires maintaining a minimum 15% of expenditures.