Salem, Ore. — Moody’s Investor Service has assigned an Aa2 rating to the City of Salem and the City’s 2023 General Obligation Bonds.
By approving the $300 million community improvement bond measure in November 2022, residents in Salem have allowed the City to fund a 10-year plan to increase funding for street upgrades, sidewalk construction and repair, construction of bicycle facilities, replacement of old fire engines and equipment, updating information technology and cybersecurity tools, acquiring property for future affordable housing developments, fire stations, and two branch libraries; and complete earthquake safety upgrades to the Civic Center. Projects are planned throughout Salem.
A bond rating can be thought of as a credit score for large organizations such as cities. It helps determine the kinds of interest rates a city can get when it goes to borrow money via a bond. Rating agencies, like Moody’s evaluate city finances based on the strength of the local economy and tax base, financial management, debt, pension obligations and governance.
“We’re very happy that the Moody’s rating reflects Salem’s solid economic growth and outlook, strong property wealth and healthy financial position,” City Manager Keith Stahley said.
The rating applies to two bond series, 2023A (federally taxable) with an estimated par amount of about $12 million and 2023B (tax exempt) with an estimated par amount of about $88 million. Par value is the amount of money that bond issuers, the City in this case, promise to repay bond holders at the bond’s maturity date.
In addition to economic growth and stability, Moody’s rating notes the City’s strong practices “supported by a good management team and prudent fiscal practices.” One challenge Moody’s noted was the likely need to add to the City’s core revenues, particularly in the General Fund, due to the state laws limiting assessed property valuation growth. For more on the City’s Five-Year Financial Forecast, watch Salem’s Chief Financial Officer presentation to the Budget Committee in January 2023 and take a turn trying to balance the City’s budget with Balancing Act.