Cambridge Earns AAA Ratings for 19th Year

Nations three major credit rating agencies affirm City’s status for 19th 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 recognize the City Council 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 factors in the City receiving these ratings is our strong and dedicated team.”

The AAA ratings are in conjunction with the City's sale of $90.9 million in General Obligation bonds and $2.5 million in minibonds. 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 renovations.

Saving Taxpayers Money

Over the last 19 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 is poised to embark on a significant increase in debt issuance over the next few years to fund the City’s school rebuilding program, the AAA rating will play a significant role in the City being able to secure the most favorable interest rates, saving Cambridge taxpayers millions of dollars. 

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

Excerpts from the Rating Agencies Reports 

Moody’s Investors Service (Download Report)

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 significant 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 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 (Download Report)

Fitch expects the city to maintain strong financial resilience through an economic cycle, given its historically strong revenue performance, conservative budgeting practices and superior degree of inherent budget flexibility. 

During times of economic weakness, management has controlled spending and staffing levels to offset reductions in revenues. The city's strong budget monitoring practices and financial planning bolster the city's operating environment.

Cambridge continues to maintain and strengthen its position as a national leader in the life sciences and high-tech sectors. Expansion in these sectors has contributed to tax base, employment and resident income growth over the past several years, and is projected by the city to continue for at least the near future.Cambridge also continues to attract research and development companies, ranging from startups to international companies. 

Standard & Poor’s Corporation (Download Report)

We view the city's management as very strong, with strong financial policies and practices under our Financial Management Assessment methodology, indicating financial practices are strong, well embedded, and likely sustainable.

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.