The City of Cleveland’s credit rating has moved up from a AA- and A+ on differing bond types to AA on all bond types. The ratings are by Standard & Poor’s Rating Services.
The general obligation bond rating went up two notches from A+ to AA. The overall credit rating went from AA- to AA.
In a letter to Shawn McKay, city finance director, the organization stated it was “affirming the stable outlook” for Cleveland.
The outlook is based on the ratings and a two-year projection.
“It’s basically geared toward our ability to borrow and our ability to pay that back. It’s a favorable comment or acknowledgement of the city’s financial practices,” McKay said. “When the city wants to do a project, say for instance the gym (replacing the Cleveland High School Raider Dome) they (the city of Cleveland) would go to the market and issue bonds. The higher the rating, the better the rating, the lower the risk that is involved in those bonds and the lower the interest rate.”
He said the city’s annual budget and audit are considered in determining a rating.
The rating agency then asks questions for more information. McKay said the process takes about three weeks.
“We believe Cleveland’s budgetary flexibility is very strong with available revenues at 33.7 percent of operating expenditures in fiscal year 2013,” Standard & Poor’s said in its rationale of the rating. “In our opinion, very strong liquidity supports Cleveland’s finances, with total government available cash at 26 percent of total government fund expenditures and at more than four times debt service.”
The rationale went on to point out the strength of the municipality’s debt and contingent liabilities profiles and pension payment program.
“It (the rating) just builds upon the fact that the city is well managed,” McKay said. “We maintain adequate reserves to meet our financial obligations to operate the city, and I think having this increase in our rating in the long run will save us money on our interest cost. “