Bond Rating Bumped Up Again

How many cities do you know that have had their bond rating increased twice in the past 12 months? Quite the opposite is happening for many cities that have had to make drastic cuts and nearly deplete what little reserves they have left. But Casa Grande has in fact had its bond rating bumped up. Last summer the City’s bond rating was increased to AA-. Today I learned our rating was increased yet again to a solid AA.

Bond ratings are like our individual credit score. Like our credit score bond ratings are set by credit rating agencies and in the bond market, like the individual credit score, there are three major agencies - Moody's, Standard & Poor's, and Fitch Ratings. There are nearly 20 levels to a bond rating the highest being AAA and lowest being D. Anything below BBB is considered junk, much like Greece’s bond rating and some other governments.

So what does it mean to have AA bond rating? Well, AA is just two levels shy of a perfect AAA, the rating goes from AAA, AA+, AA. Very few cities have a AAA bond rating and realistically only cities above 100,000 population receive a AAA ratings. For a city like Casa Grande, population 46,000, a AA is just about as good as it can get. This means lower interests rates on bonds.

But why have we’ve been so fortunate, that answer is fairly simple really. We’ve saved up over the years by not spending revenue generating from the growth and construction. Our fund balance (reserves) increased from $3 million to over $30 million over 6-7 years. The ratings agencies had anticipated we would tap into our reserves and draw it down significantly but we’ve been able to maintain it above $20 million and the City’s leaders want to keep it that way.