Moody’s Investors Service announced today Madison would be maintaining its “AAA” bond rating, the highest possible for any municipality.
The bond rating, essentially a city’s credit rating, will continue to allow the city to pay the lowest interest rates offered and get citizens the best rates when the city borrows for infrastructure investments. Madison will join only a small number of municipalities in the country currently with the rating.
This news comes at the heels of Dane County’s loss of its “AAA” rating. Its lower “AA” rating was attributed to the recent dip in the economy and means the county will pay higher interest rates than it has in the past.
According to Rachel Strauch-Nelson, spokesperson for Mayor Dave Cieslewicz, there are several factors that have allowed the city to maintain its rating.
Strauch-Nelson said the most important factor was the fund balance the city has preserved over the years. This “rainy day reserve” is a result of “good budgeting and planning over the years.”
“We budget for capital projects with a five-year plan in place,” Strauch-Nelson said. “With that we can plan for capital improvements that will be made within the next five years.”
Given the city’s budgeting, which Strauch-Nelson says it has led to the city’s rainy day reserve of $30 million — an amount she said is significant compared to other municipalities in the area.
This reserve is also what she says separates the city’s finances from the county’s.
“The county reserve has been depleted quite a bit,” Strauch-Nelson said. “They do not have, at this point, a reserve the size that we do.”
City Council President Tim Bruer, District 14, praised city staff for the retaining the “AAA” rating, especially since the city was under “an unprecedented level of scrutiny.”
Bruer also said he has seen in the news countless other municipalities across lose their bond rating.
“Preserving the best bond rating speaks volumes of the leadership [city departments],” Bruer said. “I don’t think we’d be here today if it weren’t for that.”
Despite the considerable reserve in the city’s pocket, it too is facing difficulties brought on by the economic downturn. Strauch-Nelson said Madison is projected to have a $4 million shortfall in revenue by the end of the year.
While $1.5 million of it is expected to be made up by the mayor’s hiring freeze, the rest may come from the fund balance, something Strauch-Nelson said will be OK because the city has been actively contributing to the fund for years.
“It’s important to maintain the fund balance as much as possible so if we’re in an economy like this, we have it to turn to,” she said. “We budget very conservatively. We assume our revenues are lower and our expenses higher, so we end up putting money away each year into the fund balance.”
