Every town and city does routine upkeep of roads and civil infrastructure. However, raising the necessary cash is often easier for the Cambridge government since the city is one of 27 municipalities nationwide to earn AAA ratings—the highest ranking possible—from all three major U.S. creditors.
For example, when Harvard students returned to campus this fall, they found the expanse of cement and grass between Harvard Yard and the Science Center had been reduced to a walkway lined with wire fencing and jersey barriers. The city is reinforcing the underpass on which the walkway sits while Harvard digs up the footpath to design a new common space.
For expensive construction projects like this one, cities are often unable to fund the improvements in a lump sum out of the city’s coffers. Governments therefore sell municipal bonds.
In February, Cambridge sold $40.5 million in general obligations bonds, a type of municipality bond, to fund capital projects, such as the Science Center underpass project and open space improvements.
Cambridge’s other bond-supported ventures this year include sewer reconstructions and street and sidewalks improvements.
The city of Cambridge issues bonds to the Depository Trust Company in New York, one of the world’s largest securities depositories. Purchasers are willing to buy bonds at a lower interest rate from cities more likely to pay the bonds off on time and in full, and Cambridge’s AAA rating indicates that it is such a city.
Three credit agencies—Fitch Ratings, Moody’s Investors Service, and Standard & Poor’s—rank municipalities on a scale from D (in default) to AAA (prime).
Since 1999, Cambridge has scored top marks from all three agencies, according to city officials.
All three agencies noted the presence of higher education institutions in Cambridge in explaining their ratings.
Standard & Poor’s cited the “strong and dynamic local economy, anchored by Harvard University and Massachusetts Institute of Technology” as a reason for Cambridge’s rating.
The University acknowledged that a strong Harvard supports a strong Cambridge, and vice versa.
“Harvard is a stabilizing influence on the local economy. That influence is enhanced and realized by steadfast Cambridge management and leaders, helping to stretch municipal dollars in a challenging economic climate,” wrote Harvard Public Affairs and Communications Vice President Christine M. Heenan in an email.
Harvard and MIT are the largest employers in Cambridge, helping ensure stable employment as well as supporting investment projects.
“The fact that they’re the largest taxpayers and the largest employers gives the city a lot of stability,” said Assistant City Manager for Fiscal Affairs Louis Depasquale.
Credit agencies also noted Cambridge’s government as a strong driving force for the city’s financial stability.