Credit Rating (Municipal)
An assessment by a rating agency (Moody's, S&P, Fitch) of a city's ability and willingness to repay its debt obligations. Higher ratings mean lower borrowing costs.
How It Works
Credit ratings range from AAA/Aaa (highest quality) to D (default). Most cities carry investment-grade ratings (BBB/Baa or above). Rating agencies evaluate a city's economic base, financial performance, debt burden, pension obligations, and management quality. A downgrade can increase borrowing costs by 25-100+ basis points, costing millions over the life of a bond issue. Cities guard their credit ratings carefully as they directly affect taxpayer costs.
Related Terms
- Municipal Bond — A debt security issued by a city, county, state, or other government entity to finance capital expenditures. Interest income is generally exempt from federal income tax.
- General Obligation Bond (GO Bond) — A municipal bond backed by the full faith, credit, and taxing power of the city — meaning the city pledges to raise taxes if necessary to repay bondholders.
- Debt Service — The annual cost of repaying outstanding municipal debt — including both principal payments and interest on bonds and other borrowings.
About This Definition
This definition is part of the CitySpend Municipal Finance Glossary — 59 terms explaining how city governments fund and manage public services. All definitions are written in plain language for taxpayers, journalists, students, and municipal bond investors.