The City of Watertown maintained its high bond rating by S&P Global Ratings for the 2025 general obligation bonds. Watertown will have more than $56 million in general obligation loans that will be used for capital projects, including the construction of the new Watertown High School.
City officials received a letter from S&P dated May 16, 2025 informing them of the AAA bond rating for the $56.83 million series 2025 general obligation municipal-purpose loan bonds. Projects to be funded with the bonds include high school improvements, street reconstruction, middle school HVAC replacement, sewer system improvements, and vehicle and equipment replacement.
The letter reads: “The stable outlook reflects our expectation that Watertown will continue to produce surplus operating results and growing reserves, given stable revenues supported primarily by property taxes and a forward-looking management team.”
The letter also includes a note about a scenario that could lead to lowering of Watertown’s rating.
“We could lower the rating if budgetary performance were to materially deteriorate leading to substantial reserve drawdown,” the letter reads.
In the rating summary, S&P cited Watertown’s “affluent base,” the proximity to MIT, the fact that the City has maintained reserves, and that the City “continues to exhibit sufficient flexibility in its budget to contend with year-to-year contingencies.”
They also noted that the High School project remains on budget despite rising costs.
“The city has been able to absorb them with a stabilization fund and Massachusetts School Building Authority funding support,” the letter reads.
Payments into municipal pension and retirement benefits by the City were also factored into the rating.
“We do not view pension costs as a long-term credit concern for Watertown because of high funding status, manageable liabilities, and overall fixed costs have declined materially over the past three years as a result,” the letter reads. “We expect contribution increases will remain affordable due to revenue strength, strong reserves, and conservative budgeting despite some growth related to staffing and compensation increases. We consider Watertown’s other post-employment benefits liability a long-term credit consideration as the city plans to achieve full funded status in 2031.”
Congratulations and no surprise! If only the United States government under Trump could have done the same!