Key Rating Drivers Revenue Framework: ‘aaa’: Revenues are derived primarily from property taxes, and total annual general fund revenue growth over the past 10 fiscal years has exceeded U.S. GDP rates, reflective of strong growth in Cambridge’s economy and tax base. Prospects remain strong for future economic advancement. The city maintains significant excess levy capacity under the state’s Proposition 2 1/2 law, providing for a high legal ability to raise revenues. Expenditure Framework: ‘aa’: The natural pace of spending growth is expected by Fitch to be in line with or slower than natural revenue growth over time. Carrying costs for debt and retiree benefits claim a moderate proportion of governmental spending. Fitch expects carrying costs to remain moderate even with future debt issuances and budgeted annual increases in other-post employment benefit (OPEB) and pension contributions. The city maintains strong legal control over headcount and other key employment terms as provided by state statute. Long-Term Liability Burden: ‘aaa’: Cambridge’s direct debt, net of water and sewer debt paid from user charges, and Fitch-adjusted net pension liabilities (NPL) are low at approximately 5% of residents’ personal income. Fitch anticipates Cambridge’s long-term liability burden will remain in line with the ‘aaa’ assessment based on expected growth in the city’s population and personal income, future debt plans, and a rapid pace of principal amortization. OPEB liabilities compared to personal income are high when compared to debt and NPLs, but management is actively managing these costs.
Wed 22 Feb, 2023 – 4:20 PM ET