City Bond Ratings
A bond rating is a measure of an entity’s ability to repay its debt, and in assigning a rating to the City of Austin’s debt issues, ratings agencies consider the performance of the local economy, strength of the City’s financial and administrative management, and various debt-ratio measurements. The three major rating agencies for General Obligation (GO) debt are Moody's Investors Services, Standard and Poor's, and Fitch. All three ratings agencies assigned the City of Austin’s GO debt, which pays for publicly used capital improvements, their highest possible ratings in Fiscal Year (FY) 2019.
Revenue bonds are different from GO bonds in that debt service is paid by ratepayers both inside and outside the city. Factors considered when rating revenue bonds include financial performance of the enterprise activity, long range planning for capital improvements, and the process of setting rates and fees. The level of revenue debt is dependent upon the number of enterprise activities within the City. Because the City of Austin owns its own water and wastewater utilities as well as an airport, convention center, and electric utility, revenue debt issued by the City will exceed that issued by many municipalities of comparable size which do not provide those services. The GO and combined utility systems’ revenue bond debt ratings are listed in the table below:
The City of Austin's GO bond ratings have remained at the highest possible rating for many years. Because of the implementation and adherence to its debt management financial policies, Austin has been able to retain its excellent bond ratings even during periods of economic stress. As a consequence, the City will continue to receive competitive interest rates when entering the bond market. The GO bond ratings for the past 5 fiscal years (FYs) are below:
Additional Measure Insights
The City sells bonds to finance a major portion of its capital improvements program. GO bonds fund improvements such as streets, police and fire stations, health clinics, parks and libraries, and are repaid by property taxes. Revenue bonds are used to finance capital projects for the utilities. They are repaid from revenue of the enterprise and not from property taxes. The City's outstanding debt from all sources as of September 30, 2019, is as follows:
Measure Details and Definition
1) Definition: This measure includes the City bond ratings, which are indicators about the City's ability to repay its General Obligation and Revenue bonds.
2) Calculation method: City bond ratings are assigned by various rating agencies (including Moody's Investors Services, Standard and Poor's, Fitch, and Kroll) at the time the bonds are issued. In assigning a rating to the City of Austin’s debt issues, ratings agencies consider the performance of the local economy, strength of the City’s financial and administrative management, and various debt-ratio measurements.
3) Data Collection Process: The City bond ratings are collected and monitored by the City of Austin Treasury Office and reported in the annual budget document.
4) Measure Target Calculation: N/A
5) Frequency Measure is Reported: Annually (Fiscal Year)
Date page was last updated: August 2020