MARYSVILLE – The City of Marysville’s outstanding debt for water and sewer systems has been upgraded from an ‘AA’ rating to ‘AA+’ by the Standard and Poor Global Ratings this year, the second highest bond rating below AAA.
S&P reviews the city finances, debt structure, economy, demographic factors and management practices of the governing body and administration to determine the city’s ability to meet debt payments. Bond rating can only occur when proposing to issue debt and periodic review of issued debt, which was the case of this upgrade, explained Finance Director Sand Langdon.
“An upgrade in the bond rating basically translates into lower interest rates. That’s a win for taxpayers because it reduces the cost of financing large utility projects,” Langdon said.
‘The upgrade reflects our view of the system’s liquidity position, which strengthened over the past 10 years, consistently robust all-in coverage metrics, declining debt service obligations, and lack of future debt plans. Further supporting the upgrade are the manageable annual capital needs that are driven primarily by renewal and replacements of aging infrastructure that management plans to fund with reserves. These factors, in combination with annual rate-setting practices, support our view that financial metrics will be substantiated at or near current levels,’ the April 2021 rating summary states.
The rating helps investors know their potential risk – the higher rating, in theory, provides a lower risk. The higher rating does imply a greater ability to meet debt payments which translates into a lower interest rate.
S&P noted that Marysville’s credit strengths include “very affordable” monthly utility rates, low debt-to-capitalization ratio and robust regional economy, according to a city news release.
The risk review also found that Marysville has an abundant water supply, about half of which comes from groundwater wells and the balance purchased from the City of Everett through a long-term agreement, and the wastewater treatment system has capacity for current and future growth, the news release continued.
S&P Global’s mission statement is to accelerate progress in the world by providing intelligence that is essential for companies, governments, and individuals to make decisions with conviction.
For over 160 years, S&P Global has been turning information into insights, providing essential intelligence that accelerates progress. Poor’s Publishing Co., which issued its first credit rating in 1916, merged with Standard Statistics Co. to form S&P in 1941 and has now grown to having over 23,000 employees across the globe.
According to S&P, ‘Credit ratings are forward looking opinions about an issuer’s relative creditworthiness. They provide a common and transparent global language for investors to form a view on and compare the relative likelihood of whether an issuer may repay its debts on time and in full. Credit Ratings are just one of many inputs that investors and other market participants can consider as part of their decision-making processes.’
The city of Marysville now has one of the highest revenue S&P scores, along with Everett who also maintains an AA+ rating in both revenue and limited tax general obligation (LTGO), in Snohomish County. Edmonds holds an AAA, the highest rating, in LTGO but an Aa3 rating by Moody’s in revenue which is equivalent to an AA- in S&P’s scale. Lynnwood holds an AA+ S&P rating in LTGO and an AA S&P rating in revenue.