The credit rating agency, Standard & Poor’s, has raised its long-term rating of city of Hermiston general obligation debt from “A+” to “AA-.”
S&P revised its previous assessment of Hermiston’s management condition from “good” to “strong” based on recent adoption of formal debt management, financial reserves, investment management, and long-term financial planning policies. Hermiston Assistant City Manager Mark Morgan said the company’s assessment of the city’s financial position also indicated that the city has very strong budgetary flexibility, very strong liquidity, and strong debt and contingent liabilities.
A credit rating in the “AA” range is the second highest category assigned by S&P, which rates credit from “AAA” to “D.” The “AA” rating indicates a, “very strong capacity to meet financial commitments,” according to S&P. The company’s rating guide shows that “A” ratings have, “strong capacity to meet financial commitments, but somewhat susceptible to adverse economic conditions and changes in circumstances.” Both of these categories indicate “investment grade” ratings, according to S&P.
General obligation debt is used when cities issue general obligation bonds. These bonds are issued with the belief that a municipality will be able to repay its debt obligation through tax revenue. No assets are used as collateral. Having a higher credit rating for general obligation bonds gives investors more confidence in purchasing the city of Hermiston’s bonds, said Morgan.
Credit ratings are opinions about credit risk. Standard & Poor’s ratings express the agency’s opinion about the ability and willingness of an issuer, such as a corporation, or a state or city government, to meet its financial obligations in full and on time. S&P’s summary of Hermiston’s rating can be found on the city of Hermiston website.
