Standard & Poor’s Financial Service raised its long-term rating of the town’s general obligation, or GO, bonds from AA+ to AAA on Aug. 25.
Similar to a person’s credit score, a city or town’s bond rating reflects its capacity to meet financial commitments. The higher a bond rating, the more funding a town or city is likely to receive in the form of bonds. The ratings range from D to AAA, with the latter denoting a very strong ability to meet financial obligations.
Chapel Hill and Durham also have AAA GO bond ratings.
Lindsay Wilhelm, associate director for Standard & Poor’s, said in a press release that Carrboro’s upgrade to the highest rating reflects the town’s strong economy, budgetary performance, management and liquidity.
Standard & Poor’s manager Alex Ortolani said Carrboro achieved the higher rating partly because the local GO criteria used to rate towns was changed on Sept. 12, 2013.
“The impact changes somewhat when we review these ratings because the underlying analysis has changed, and so that’s partly the reason for the upgrade,” Ortolani said.
“The city or town being rated would still need to show positive developments for the upgrade though, so it’s not the total reasoning.”
Standard & Poor’s also issued a stable outlook for Carrboro, meaning it considers the town’s financial situation sustainable and does not expect to change the rating during the next two years. However, it could lower the rating if it determines population growth in the area has strained the town’s resources, according to the press release.
Carrboro Town Manager David Andrews said he is very excited about the town’s AAA rating.
“I think it says that we have a real strong economy here, that we have a healthy economy, that the town is a financially well-managed organization,” Andrews said.
“We’re fiscally prudent, we have strong cash reserves, and that’s really what’s helped to achieve that AAA bond rating, and I think that our businesses and citizens will benefit from that.”
Although he doesn’t expect people to benefit from the upgraded rating right away, Andrews said it could save taxpayer money on future projects the town decides to take on, such as bike lanes and sidewalks.
“What I hope is that, should we issue any more bonds in the future, I hope that our AAA bond rating will allow us to get a lower interest rate, which means that we would save our citizens and our businesses money,” Andrews said.