The City of Oakland’s credit ratings were upgraded to AA+ by credit rating agency Standard and Poor’s (“S&P”) and affirmed at Aa1 by Moody’s. The ratings are one-notch below the highest available credit rating of AAA. This latest upgrade from S&P follows a similar upgrade from Moody’s in 2020.
The S&P upgrade recognizes the City’s strong financial profile, diverse economic base, and robust fiscal policies. Moody’s rating similarly highlights the City’s strong tax base and economy, as well as sound fiscal policies and an experienced, prudent management team.
“I’m grateful the rating agencies have recognized Oakland’s commitment to prudent financial policies and sound fiscal management,” said Oakland Mayor Sheng Thao. “At the City of Oakland our entire organization is deeply dedicated to serving our community and maintaining the highest levels of professional practice, and sound financial practices are a key element of that dedication. This upgrade reflects the incredible work of our City Council, our staff, and our administration. The improved rating will help make us that much more efficient turning funds into services, and it reflects growing confidence in the fiscal management of our great City.”
Both credit ratings agencies point to challenges ahead for the City, among them rising costs to provide services and substantial long-term liabilities for retiree pensions and health care. The stable outlook assigned by both credit rating agencies signals their expectations that the City will be able to meet these challenges through continued prudent financial management and ongoing economic growth.
The City’s strong post-pandemic economy was cited by both credit rating agencies. Moody’s rating anticipates “ongoing moderate growth” for the City based on a “large and growing tax base” while S&P noted “strong housing demand and ongoing development,” as well as “the diversity of the city center [and] stronger recovery compared to some peers.”
For more than a decade, City leadership has focused on strengthening the City’s financial health. The City Council has adopted policies that fund operating reserves, created a “rainy day fund,” reduced retiree health care costs in partnership with labor organizations, and set aside resources to fund long-term liabilities. S&P and Moody’s both highlighted these gains and have acknowledged the City’s financial improvement through three ratings upgrades over the past seven years.
The upgrades will allow the City to sell its bonds to investors at lower interest rates, thereby reducing the cost of financing capital improvements over time and allowing the City to decrease the property tax levy required to support the bonds, ultimately reducing costs for Oakland property owners.
