City of Cedar Park earns AAA Bond Rating
Perfect rating allows City to issue debt at lower interest rates,
stretching taxpayer dollars
International credit rating agency S&P Global (formerly Standard & Poor’s) has raised the City of Cedar Park’s General Obligation Bond debt from an AA+ rating to an AAA rating, which is the highest rating possible. This is the fourth grade increase in the past 16 years for the City of Cedar Park.
A bond rating for a City is akin to a credit score for an individual person or business. A higher bond rating enables the City to issue debt at a lower interest rate and allows the City the flexibility to refinance existing debt at a lower interest rate – ultimately saving taxpayers money. Receiving this bond rating upgrade at the beginning of the City’s bond program resulting from the successful May 2022 bond election maximizes the benefit to Cedar Park residents. The AAA rating has already saved the City around $745,000 in total debt service costs on the 2022 General Obligation Bond issuance.
Mayor Jim Penniman-Morin and the City Council Members praised the work of the City Manager’s staff, Finance staff and all City staff who worked on the bond rating increase.
“Obviously, this is really exciting,” Mayor Penniman-Morin said. “There were only 19 cities across the State with a triple-A rating, we make number 20 and we have the sixth lowest tax rate of those 19 cities, which shows the careful financial management of our professional staff.”
Member Anne Duffy noted the City’s practice of defeasance, which means paying off debt early. “In 2017, we adopted that policy,” she mentioned.
Through defeasance, the City has saved $5.1 million in interest over the past six years.
Mayor Penniman-Morin added, “One of the things that clearly meant a lot to the S&P ratings analysts was our strong defeasance of debt since 2017, something for the Council to keep in mind as we head into budget cycle.”
Council Member Eric Boyce says he was thrilled about the news of the bond rating increase.
“I cannot underscore enough, as a financial professional, for us to achieve this is a major, major accomplishment,” Council Member Boyce said.
By being able to stretch bond dollars farther, additional projects can be accomplished, which benefits the community as a whole. Bond ratings are also a good measure of the health of the local economy.
Financial analysts assess a city on four components when determining its rating: City management, local economy, financial health and debt management. S&P analysts noted Cedar Park’s consistently strong performance on all four components.
GO Bond Rating
According to S&P Global’s report, the GO Bond rating action reflects, “The city’s consistently strong economic expansion and its proven ability to manage growth while maintaining a very strong financial profile.” It also noted that Cedar Park is positioned to likely maintain stability, given its established very strong financial reserves and sophisticated management that actively monitors financial operations.
S&P commended the City for multiple factors including a very strong economy, sophisticated financial policies and practices, a stable operating performance with maintenance of very strong reserves and liquidity.
May 2022 Bond Election
In May 2022, a majority of voters approved a total of $158.8 million in General Obligation Bonds for Transportation, Parks and Recreation and Public Safety. The new bond debt – especially when issued at lower interest rates afforded by this AAA bond rating – can be supported within the City’s existing debt service portion of the tax rate.