Shaker Heights' Debt Rating Is AA+

SHAKER HEIGHTS, OH — S&P Global Ratings recently issued ratings on two Shaker Heights' debt obligations, including a AA+ affirmation of the city's long-term debt obligations. The agency issued a AA rating to a second bond, issued by the Cleveland-Cuyahoga County Port Authority, which will be used to finance Van Aken Boulevard redevelopments.

The city is unable to fund the Van Aken work with its own money because part of the funds would go to private use development. That restriction led the city to partner with the Port Authority.

“The S&P report and bond rating take into account the strong financial position of Shaker Heights and the City’s stringent management and financial practices and policies," Mayor Earl Leiken said in a statement. "We continue to achieve top-notch bond ratings that enable us to support important projects in the City, like the Van Aken District.”

The report is a fairly glowing review of Shaker Heights. In the report, S&P outlines why it awarded AA+ and AA ratings to the bonds, including:

-Very strong economy, with access to a broad and diverse metropolitan statistical area (MSA);
-Strong management, with good financial policies and practices under our Financial Management Assessment methodology;
-Strong budgetary performance, with operating surpluses in the general fund and at the total governmental fund level in fiscal 2016;
-Very strong budgetary flexibility, with an available fund balance in fiscal 2016 of 59% of operating expenditures;
-Very strong liquidity, with total government available cash at 77.1% of total governmental fund expenditures and 14.7x governmental debt service, and access to external liquidity we consider strong;
-Very strong debt and contingent liability position, with debt service carrying charges at 5.3% of expenditures and net direct debt that is 39.6% of total governmental fund revenue, as well as low overall net debt at less than 3% of market value; and
-Strong institutional framework score

"The city has a projected per capita effective buying income of 178% of the national level and per capita market value of $80,053. Overall, the city's market value was stable over the past year at $2.2 billion in 2017. The county unemployment rate was 5.4% in 2016," the report says.

The report also notes that the city had operating surpluses of 6.3 percent of expenditures in the general fund and of 7.8 percent across all governmental funds in fiscal 2016.

"General fund expenditures for 2016 (unaudited at this point but we base it on the expectation that current numbers will be approved by the state auditor) include $10.6 million in recurring transfers out of the general fund to the capital projects fund and various non-major governmental funds," the report says. "According to the 2016 audit, revenues from a 2.25 percent income tax rate generated nearly 68 percent of the total general fund revenues while property tax revenues represented 12 percent. We expect these revenue streams to remain stable."

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