Is it possible to get a better grade than an A+?
When it comes to municipal bond ratings, you can.
Standard & Poor’s (S&P), one of the nation’s most influential credit rating agencies, recently upgraded Tacoma’s municipal bond rating to AA-, or high-grade status.
For more than 20 years, Tacoma’s bonds were rated A+ –or upper-medium grade.
S&P rates bonds from 8,000 municipal agencies and assigns them a grade in descending alphabetical order from AAA to CCC.
A higher bond rating means when the City of Tacoma borrows money for such projects as the Greater Tacoma Convention Center or its police facilities, the projects may cost less because of decreased interest expenses.
Since property taxes fund the interest expense, a higher bond rating ultimately can save taxpayers money.
“The upgrade proves that Tacoma is a solid credit risk,” said City Manager Ray E. Corpuz, Jr. “The City Council has passed some tough-but wise-fiscal policies that have helped get us to this point.”
S&P reviewed the city’s income and expenses to set its Tacoma ratings. S&P cited “…sustained growth in assessed valuation, and solid financial management” as reasons for the higher rating. S&P also noted, “…the city’s management has demonstrated a commitment to infrastructure and facility development that will help support revenue growth in the long term.”
S&P listed Tacoma’s other strengths as its participation in a strong Puget Sound economy, conservative fiscal policies and moderate debt.
City Treasurer Steve Marcotte said municipalities earn good bond ratings much like individuals earn good credit.
“If you make sound financial decisions, banks are more willing to lend you money – and at a better rate,” Marcotte said.
He continued: “When your interest rate is lower, you ultimately pay less overall. You can use the money you saved for other things.”
At press time, the City Council was scheduled to vote today on an ordinance to sell $34.3 million of tax bonds for the construction of a voter-approved police headquarters and four neighborhood substations.
“Under our upgraded rating, we believe we’ll save nearly $1 million over the life of the police facility bonds,” Marcotte said.
In the coming months, the City Council also will vote on issuing bonds for the new convention center and public parking expansion projects.
The credit agencies will reevaluate the city again if the council approves this bond sale.