Standard and Poor’s Global Rating (S&P), the world’s largest independent credit rating agency, has raised the credit status for the City’s Utilities Department from AA- to AA. This is a testament to the hard work, dedication, and financial stewardship of our City Utilities Department despite the challenges of operating in a rural region.
Ratings by independent agencies like S&P are vital to institutions and investors alike. Much like an individual credit rating, the City’s credit rating lets investors have an idea of our ability to meet our financial obligations and pay our bills. Capital improvements and infrastructure projects, like water and wastewater, are exceptionally expensive endeavors. Although our staff does amazing work in winning state and federal grants, these are often not enough to maintain a water system that provides clean and reliable drinking water to the residents of Modesto. Sometimes we need to borrow money by selling municipal bonds to finance the projects. Higher ratings make our municipal bonds more attractive to investors and less expensive to pay back.
In evaluating the City of Modesto Utility Department’s financial health, S&P noted our “extremely strong liquidity position”, “affordable service rates in the context of our service area”, and “good operational and financial management practices.” This is the praise we always knew to be true that independent rating agencies are finally recognizing.
The S&P report did come with a word of caution. The rating could be lowered if there was to be “unforeseen leverage and higher operating costs, or if there is a significant drawdown in liquidity” in the department.
We have worked very hard to set reasonable and affordable service rates, set aside appropriate reserves, and control costs through financial management best practices. It is our goal to maintain a healthy financial balance sheet and improve our credit ratings so we can continue to provide best-in-class services to the residents of Modesto.
There are not many issues more important than delivering clean reliable drinking water to the residents of Modesto. This news should be a comfort to the ratepayers that the city will be able to continue to deliver these services now and in the future. This is yet another example of the world-class organization we are building here in Modesto, and I am proud to report this amazing progress for our City.