City receives an ‘AAA’ bond rating.
The City of Austin has received an ‘AAA’ bond rating and a stable outlook on its ability to repay debt for long-term capital improvement projects for the eighth consecutive year. The ‘AAA’ rating is the highest attainable bond rating that a city can achieve and allows the City to borrow money at a lower cost.
Austin has maintained its ‘AAA’ bond rating for general obligation debt from all three major U.S. financial rating agencies – Standard & Poor’s, Moody’s Investors Service, and Fitch Ratings - since Fiscal Year 2010.
“I am very pleased that all three rating agencies reaffirmed our ‘AAA’ credit rating,” said City Manager Spencer Cronk. “Austin has maintained its strong financial position thanks to a strong economy fueled by steady population and employment growth, a diverse employment base, our conservative financial and budget practices, and proven history of balancing needs with available resources.”
A bond rating is a measure of a city’s ability to repay its debt. Several factors are considered when assigning a rating, including the local economy, strength of the City’s financial and administrative management, how well the budget is managed, as well as debt ratios. The ‘AAA’ bond ratings signal high credit quality, allowing the City to issue debt at the lowest interest rates, thus reducing future debt service costs.
Last week, the City completed a sale of its 2018 general obligation debt including tax-exempt public improvement bonds, certificates of obligation, public property finance contractual obligations, as well as taxable public improvement bonds, which are used to fund affordable housing. The tax-exempt public improvement bonds, which have a 20-year term, were sold at a true interest cost of 2.77%.
The City of Austin regularly undertakes capital improvement projects to improve public facilities and infrastructure assets for the benefit of its citizens. Capital improvement projects include, for example, new construction or renovation of recreation centers and libraries, parkland acquisition, street repaving, urban trails, creek restoration, mobility projects, and the purchase of new fleet vehicles and information technology networks.
The City sells general obligation debt to finance a significant portion of its long-term capital improvement projects. General obligation debt is secured by the full faith and credit of the City of Austin and a levy of taxes based on the assessed value of property. General obligation debt includes public improvement bonds (voter-approved General Obligation bond programs), certificates of obligation, and public property finance contractual obligations.