News today that the three major credit rating agencies—Standard & Poor’s, Moody’s and Fitch—have reaffirmed Seattle’s high bond ratings confirms that our focused and strong fiscal management approach is the correct strategy.
The excellent ratings validate our actions over the past several years to maintain a solid financial foundation. Despite the sluggish economy and significant budget cuts, the Council and Mayor, along with the Retirement Board of Administration and City employees, worked together to keep our fiscal house in order. The excellent bond ratings strongly affirm the course we have followed.
The City, including City Light and Public Utilities, use debt financing for capital improvement programs and spend approximately $370 million per year to service this debt. High bond ratings translate into lower interest payments that save millions of dollars in debt service payments.
In the last year and a half, the City took several steps to tighten up City financial policies to address concerns raised by the rating agencies:
- The Council adopted a new policy requiring the City to directly deposit $2 million in the Rainy Day Fund and further established that half of any year-end unanticipated General Subfund balances would be transferred to the Rainy Day Fund (Ordinance 123743). Over the next few years, the Council expects to build the Fund to approximately $40 million.
- City employees agreed to increase their contributions to the Seattle City Employees’ Retirement System (SCERS) to 10.03% of salary and the City’s contribution was increased to 11.01%, changes designed to begin to address investment losses from underperforming financial markets (Ordinance 123482 and Resolution 31334).
- The interest rate paid on City employees’ retirement contributions was lowered to 4.47% from 5.75% based on a recommendation from the SCERS Board of Administration (Resolution 31333).
These steps were the right course of action and the bond rating agencies have confirmed that.
The Government Performance and Finance Committee received a presentation on factors affecting bond ratings on March 29, 2012. The materials and video from that meeting are available online.