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Posted on: April 21, 2022

S&P Updates Credit Rating for Portland to AAA

Newsflash 2022

The City received exceptional news from Standard & Poor's Global Ratings ("S&P") over the weekend.  The S&P raised its credit rating on all of Portland, Maine's general obligation debt up to 'AAA' from 'AA+'.  This elevates the City of Portland rating to the highest available measure of creditworthiness from S&P.   The highly coveted ‘AAA’ rating significantly reduces debt service costs on bonds issued with the rating in place and creates additional demand for City of Portland municipal bonds.  S&P noted the rating increase to ‘AAA’ is due to continued growth in the local economy, very strong financial management and financial policies, and very well managed debt metrics

Finance Director Brendan T. O’Connell noted “we couldn’t be more thrilled to announce this incredibly important milestone.  The upgrade to AAA will save local property taxpayers millions of dollars on future debt issuance and makes a statement about how strongly we take our fiscal management responsibilities.”  

Mayor Kate Snyder added, "It is wonderful to receive the prestigious AAA rating from the S&P.  It reinforces the great work our finance staff has done to strengthen the City's financial profile and highlights the growth we've had in the local economy over the last several years."

The upgrade marks the second rating increase from the S&P in the last five years.  The reduction in debt service costs due to the upgrade will be significant within the City budget.  An AAA rating typically reduces total interest costs by an estimated 10 to 15 basis points when compared to similar costs on an AA+ rated bond (savings of $10,000 to $15,000 per million of debt issued).  On this week’s $51.93M municipal bond sale the savings related to the upgrade was estimated to be $520,000 to $780,000.  

The improvement in City debt metrics is related to careful management of the City’s overall debt burden and the City’s aggressive strategy to reduce costs related to the 2001 pension obligation bonds which are set to mature in 2026.  Using a combination of savings from aggressive contract renegotiations and prior debt refinancing the City plans to shield local property taxpayers from nearly $12M in pension obligation bond debt service increases over the next four fiscal years, saving local property taxpayers from a pre-revaluation estimated increase of nearly 60 cents on the mill rate.  

The upgrade from the S&P continues a busy April and May for City financial staff.  The City finalized the sale of the $51.93M of bonds on Wednesday, April 20th, is releasing the FY23 City Manager’s Recommended Operating Budget on Monday, April 25th, and is set to kick off the public input process on the City’s second tranche of American Rescue Plan Act funding in May 2022.

The full press release from the S&P can be found on the City’s website here.  

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