Editorial: Bond ratings are good news
June 10, 2014
City and school district leaders should be applauded. While the story is the sort that many readers just gloss over, local taxpayers are set to save a bundle of money as a result of recent developments.
The city of Issaquah and the Issaquah School District both recently had their bond ratings upgraded. The city’s rating was bumped up to AAA — the highest possible — by Standard & Poor’s, while the district’s was raised to AA+ by the same agency.
Ratings are determined only after the rating agency goes over the fiscal policies of an agency with a fine-tooth comb. They look at financial management, assets, existing debt and budgeting assumptions.
When governments go to sell bonds, investors look at a bond rating — almost like a credit score for government.
If a rating is higher, the city is considered to be less of a risk. Less risky investments mean that cities, school districts and other public bodies selling the bonds don’t have to pay as much in interest to entice potential investors.
That lower interest rate translates directly to money in the bank.
Typically, the rating increase doesn’t mean lower rates for existing bonds, unless they are refinanced. But they should mean significant savings going forward. As a result, large projects will effectively be cheaper for both the city and for the schools.
The rating increase does not happen in an afternoon; it is the result of years of prudent financial management. It is a shared effort by elected officials, who set conservative guidelines on spending, and staff members who work creatively to meet those expectations.
Both the city and the school district have worked hard to earn the recognition, and both are to be commended.