S&P Affirms City of Kirkland’s AAA Bond Rating

For what it's worth, Standard & Poor's (S&P) has affirmed the City of Kirkland's AAA bond rating. The AAA bond rating is the highest rating given, so it certainly is good news that Kirkland is rated so highly and it speaks well to Kirkland's financial condition. However, to many observers, S&P's reputation as a trusted monitor of the financial health of institutions has been in question since it entirely missed the mortgage-backed securities debacle. Last week S&P downgraded the rating of the United States sovereign debt from AAA to AA+, hence the scramble of local municipalities to assure citizens of their continued financial health.

The following is a news release from the City of Kirkland:

 

Stating that the City of Kirkland, Washington “has a financial position that we consider very strong,” Standard & Poor’s (S&P) Financial Rating Service affirmed the City’s credit rating of AAA and its stable outlook.  The rating review was conducted as part of an upcoming refunding of selected City bonds to achieve savings for Kirkland taxpayers through lower interest rates.  Kirkland was the second U.S. city to have its AAA rating affirmed since the recent downgrade of the U.S. sovereign debt rating to AA+, outlook negative.

 

The S&P report cited the City’s “maintenance of very strong available reserves, strong financial policies and practices, and low debt burden relative to market value” as factors for the high rating.   The report further notes that the “stable outlook reflects our view that the city’s strong financial management policies and practices have positioned it well to handle the transition and ongoing costs associated with its service area expansion” due to the recent annexation of the Juanita-Finn Hill-Kingsgate neighborhoods.

 

Cities sell municipal bonds for a variety of projects such as public building construction, utilities infrastructure, and park land acquisition.  Before municipal bonds are sold, rating agencies "rate" the ability of the local government to repay bond principal and interest.  S&P’s definition of an AAA rating is the highest rating given and represents maximum safety to the investors purchasing these bonds.

 

For more information, contact Michael Olson, Deputy Director, Finance & Administration Department at 425-587-3146 or molson@kirklandwa.gov.