Mayor Lee Announces San Francisco’s Credit Rating Upgraded to Highest Grade in City History
Major Bond Rating Agency S&P Upgrades While Moody’s & Fitch Ratings Affirms City’s Credit Ratings
Mayor Edwin M. Lee today announced major bond rating agencies have upgraded and affirmed San Francisco’s strong credit after the City met with Moody’s Investors Service (Moody’s), Standard & Poor’s (S&P) and Fitch Ratings (Fitch) in August.
“At a time when many cities and counties across California and the U.S. have seen their credit ratings suffer amid lingering financial uncertainty, San Francisco’s upgraded bond ratings are leading the state,” said Mayor Lee. “We are creating investor confidence in our City with strategic investments while applying strict budgetary and financial controls to protect San Francisco’s continuing economic recovery. We must continue our work that has stabilized San Francisco’s economy, created jobs, and has made San Francisco an economic engine for the entire region.”
“In addition to our strengthening economy, today’s upgrades reflect the smart choices we’ve made in recent years to move to a two-year budget process and to save more money in better budget years,” said Board of Supervisors President David Chiu, who led the effort to pass a budget reform measure, Proposition A, in 2009.
The S&P upgrade recognizes San Francisco’s credit strength from a “very strong economy,” strong budget flexibility, strong liquidity providing very strong levels to cover both debt service and expenditures, strong management conditions with strong financial policies and adequate budgetary performance, which is due to projected general fund deficits and deferred capital. However, weak debt and contingent liabilities due to large pension and other postemployment benefit obligations will continue to be a challenge for the City as contributions exceed 10 percent of total expenditures for fiscal year 2012. Moody’s, S&P and Fitch maintained rating outlook of stable.
S&P upgraded its credit rating to AA+ from AA on the City’s general obligation bonds and upgraded its rating to AA from AA- on the City’s lease revenue bonds and Certificates of Participation (COP). Moody’s and Fitch affirmed the City’s Aa1/AA credit rating, respectively, on the City’s general obligation bonds and rated Aa2/AA-, respectively, the City’s lease revenue bonds and COPs. The lease revenue bonds and COP ratings are one level below the City’s general obligation bonds ratings, a normal relationship between general obligation bonds and general fund-secured lease obligations.