The Sun
Sunnyvale's Newspaper

Sunnyvale scores top marks on credit rating

By Justin Berton

If the city of Sunnyvale were a person and wanted to borrow money to buy a house, the banker would simply throw the cash over the counter and say something like "Pay it back whenever."

Sunnyvale's credit rating is that good.

Earlier this month, Standard & Poor's investment rating service gave Sunnyvale a AA+ rating--the highest ranking a city government can attain--making it only the second city in California to achieve the high vote of confidence.

"The citizens of Sunnyvale share in the financial security of its city," said Jeffrey Thiemann, the analyst with S&P who assigned the credit rating.

The rating is more than just a source of civic pride for the average Sunnyvale resident: This week, the finance staff will ask the City Council to approve the refinancing of a bond used for water utilities. If the council approves the request, the AA+ credit rating virtually assures rubber-stamp approval of a low-risk, low-interest loan.

Mary Bradley, director of finances, said refinancing will save the city $100,000 per year for the life of the bond. That amounts to $1.9 million.

The city refinanced a bond for a parking garage earlier this year, saving an additional $57,000 annually for the next 20 years.

"That's enough to pay an annual salary for a worker," community relations officer David Vossbrink said.

Last year the city of San Francisco dropped from a AA to a AA- rating. Thiemann said S&P discovered significant budgeting imbalances on the city's books, causing analysts to downgrade the credit rating.

The next time the city of San Francisco wants to finance a bond, potential investors may be hesitant. In turn, the bond could be labeled "high risk," driving up the interest rates. If that happens, the city will spend dollars on interest it could have spent on civic services.

In his report, Thiemann noted Sunnyvale's "excellent financial management and position with a strong operating history and very strong reserve policies."

Thiemann said he has rated city budgets across the country for 11 years and found Sunnyvale's "forward-thinking management" to be one of the best.

"They are one of the few city governments that find a plan and adhere very strictly to that plan," he said.

The only higher rating that can be attained is a AAA status--one that no city can ever reach.

Thiemann said S&P city ratings can only go as high as AA+ because state governments often have control over local dollars, as through propositions 13 and 218 in California.

Burlingame is the other California city that has the AA+ rating.

"The fact that it is an objective financial analysis shows that the city is in strong financial health," Bradley said.

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This article appeared in the Sunnyvale Sun, March 25, 1998.
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