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S&P Global, Moody’s, and Fitch — known as the “big three” credit rating agencies — awarded the City of Cambridge an AAA rating for the 25th year in a row, Cambridge City Manager Yi-An Huang ’05 announced on Monday.
Cambridge is one of just 24 cities in the country to receive the highest assessment from the three credit rating giants. It has received an AAA rating annually since 1999.
Huang wrote in a Monday message to the Cambridge City Council that the “City holds itself to a very high standard regarding fiscal responsibility, planning and policies, but this significant honor should not be taken for granted.”
The AAA rating is a valuable asset for Cambridge as it allows the city to obtain lower interest rates on borrowing for city projects.
The most recent credit evaluation of Cambridge was spurred by the City Council’s plan to conduct a $181 million bond sale to fund several city initiatives.
Some projects that will be financed by the bond sale include the reconstruction of Tobin and Vassal Lane Upper Schools, the Harvard Square Kiosk, and improvements to Central Square.
The credit rating agencies evaluated Cambridge’s fiscal health prior to the bond sale, using criteria such as the strength of the local economy and the city management.
Cambridge’s economy is strongly influenced by the presence of large research clusters with Harvard and MIT at the core, according to Claire B. Spinner, assistant city manager for fiscal affairs.
Spinner said that Cambridge’s academic institutions and close proximity to Boston attracts pharmaceutical and biotechnology companies, allowing for an influx of investment and employment that makes Cambridge “a very vibrant and economically stable place.”
Harvard and MIT are also among the City’s top 10 highest tax payers, and provide employment to about 16 percent of Cambridge’s workforce.
The city’s careful budget supervision also helped Cambridge maintain its AAA rating.
Spinner said Cambridge has “had a very strong financial management for decades.”
Although the city has changed significantly in the past 20 years, Spinner said she sees Cambridge’s financial progress as “building upon a continued culture of strong and conservative financial management.”
“We monitor our budget carefully. We do multi-year financial planning,” Spinner said. “Because we have such a strong financial framework, we are able to maintain that flexibility.”
This culture of fiscal management was prompted by Proposition 2½, a 1980 Massachusetts law that imposed property tax limitations statewide, according to Cambridge Budget Director Taha Jennings.
Jennings said in an interview that the 1980 law “forced a recalibration of how you looked at municipal finance.”
“There was definitely a conscious effort made to improve on the city’s finances and achieve triple A’s,” Jennings added.
Spinner said that the AAA rating has allowed Cambridge to fund a number of initiatives, including a universal Pre-K program that is expected to launch in September. The program will seek to provide free preschool education for all Cambridge residents.
“It is really in our best interest to have the best interest rate, so that we can pay the least amount possible to finance all of these very important public investment projects,” Spinner added.
