Like private entities, city and county governments undergo credit rating reviews. Here's what a credit rating review is and it's just as important for cities as it is for private companies.
A credit rating review is an evaluation of the repayment ability of an individual or firm of a bond.
A bond is a written or signed promise to pay a specified sum of money on a certain date for example, contracts and loan agreements are bonds.
The actual credit rating (or score) is based on credit history, present financial conditions, and projected future conditions.
Credit is rated by credit rating agencies. The two largest credit rating agencies are Standard & Poor's and Moody's.
Credit rating agencies (CRA) evaluate the financial conditions of issuers (another word for "users") of debt and assigns them a rating reflecting the CRA's assessment of the issuer's ability to make the debt repayment.
Potential investors, families and businesses in the case of cities, rely on the credit rating review to reflect the strength and stability of the local government.
This is important for showing sound management and fiscal integrity in the allocation of tax dollars allocated to the maintenance and improvement of public goods and services citizens rely on daily. To name a few, those goods and services include roads, bridges, sanitary water, sewerage, fire and police protection, schools, hospitals, and other publicly-funded operations.
Strong credit ratings reflect a city as a good place to invest (business and resident attraction) and stay (business and resident retention). Both are necessary for effective economic development