News Release News Release The City of Palo Alto
Communications Department
250 Hamilton Ave
Palo Alto, CA 94301


PRESS RELEASE 02/21/2008
Subject :

AAA Bond Rating for Palo Alto Reaffirmed by Standard and Poor's
Contact : Lalo Perez, Director, Administrative Services    650-329-2675
Palo Alto, CA -- Standard and Poor's (S & P) recently reviewed the City’s outstanding debt and reaffirmed the existing and excellent credit ratings for each of the City’s issues. Moreover, a confirmation of the underlying General Obligation (GO) bond rating of AAA was provided. This is the highest credit rating possible and has been awarded to only a few cities in California.

The General Fund has three outstanding Certificates of Participation (COPs) debt issues:  the 1998 Golf Course certificates; the 2002 Civic Center Refinancing issue; and the 2002 Downtown Parking Improvement placement. Each of these are rated AA+, one notch below the AAA rating. The City’s utilities also have outstanding debt obligations. These are the 1995 Storm Drain bonds; the 1999 Water Quality Control Plant debt; and the 2002 Water and Gas bonds. S & P confirmed the AA+ rating on the 1995 issue as well as the AA- ratings on the 1999 and 2002 debt. In addition, for each City issue, S & P indicated a credit outlook of "stable."  

S & P’s written comments substantiating their ratings are informative.  For the GO bond triple A underlying rating, S & P cited:

  • "Continued very strong financial operations and policies"
  •  "High wealth and income levels and very high home values"
  •  "A diverse and mature economic base, which is anchored by Stanford University and plays an integral part in the Silicon Valley economy"
  • "Manageable overall debt"

Specific to the COPs, S & P mentioned:

  • "Palo Alto’s very strong general creditworthiness as lessee and obligor"
  • "The city’s covenant to budget and annually appropriate lease payments"

For the high Utility bond ratings S & P pointed to:

  • "Healthy cash balances and strong reserve policies"
  • "Very low debt levels, with most capital needs funded on a pay-as-you-go basis"
  • "Competitive rates and manageable capital requirements"
  • "A strong area economy…" and "...strong operations…

In conclusion, S & P’s report card on City debt was solid. The rating agency found the City’s finances, financial policies, and management strong. For both the General Fund and the Utilities the level of debt was considered low and manageable. In a milieu of tight credit, downgrades in the ratings of financial institutions, and the tumultuous mortgage market, affirmation of the City’s high credit ratings is noteworthy.