Cedar Park gets AA+ bond rating: Higher rating allows city to issue debt at lower interest rate

An international credit rating agency upgraded Cedar Park’s debt last Friday.

S&P Global, the agency in question, raised the City’s General Obligation Bond debt from an AA rating to an AA+ rating, which is one category away from the highest rating achievable. City officials said this is Cedar Park’s third grade increase in the past 10 years. 

S&P Global also affirmed the City’s utility debt rating of AA+, which it has maintained since 2013. 

A city’s bond rating is comparable to a credit score for an individual or a business. A higher bond rating allows cities to issue debt at a lower interest rate and allows them the opportunity to refinance existing debt at a lower interest rate. This saves taxpayers money. According to officials, receiving this bond rating upgrade at the beginning of Cedar Park’s bond program, following the successful November 2015 bond election, maximizes the benefit to residents.

“The bonds that were passed last year will go further now,” Mayor Matt Powell said. “If Cedar Park were a person our credit rating would be close to 800.”

Cedar Park officials said having the chance to stretch bond dollars further will give the city the opportunity to complete additional projects that will benefit the community as a whole. Additionally, bond ratings are a gauge of the local economy’s health.

“These ratings reflect our city council’s fiscally responsible policies and practices as well as the growing economy over the last several years,” City Manager Brenda Eivens said.

Financial analysts appraise a city on four components when determining its rating: city management, local economy, financial health and debt management. According to S&P analysts, Cedar Park’s showed strong performance on all four components.

S&P Global’s report stated that the GO Bond rating action reflects what it calls, “the City’s continued economic growth and diversification.” It noted that this has resulted in per capita market values and income levels of higher-rated peers.

City officials said S&P praised Cedar Park’s local economy, management and financial policies, budgetary performance and liquidity.

S&P Global’s affirmation of its AA+ rating on Cedar Park’s 2016 utility system reflects what it calls, “the general creditworthiness of the city’s water and sewer utility system and our view of the combination of the extremely strong enterprise risk profile and very strong financial risk profiles.”

S&P Global also noted that credit strengths should continue to shield Cedar Park’s utility system from any revenue volatility due to changes in weather, demand and usage.