Before issuing a bond, municipalities typically must have a bond rating from Standard and Poor’s (S&P), Moody’s, or Fitch. They evaluate local, state and federal governments on the economic well-being of the area and your government’s ability to pay back debt issued on a bond. In assigning a rating for general obligation bonds the rating agencies assess the following factors:

• Economy
• Debt structure
• Financial condition
• Demographic factors
• Management practices of the governing body and administration

AAA and Aaa are the highest quality and grade. Bonds rated Aaa or AAA have a high degree of creditworthiness because their issuers are easily able to meet financial commitments and have the lowest risk of default.  In the 2024 bond rating reports, it was noted that several factors contributed to the City of Kirkland’s high rating such as:

• The City's reserves have grown considerably over the past decade, and it has very high reserve balances when compared with peers.
• Cash and liquid investments are expected to remain very strong.
• There is a very strong local economy with employment opportunities throughout the Seattle-Tacoma-Bellevue metropolitan, with household incomes above the national average.
• The City of Kirkland has strong management, with good financial policies and practices.

Municipal bonds are a useful financing mechanism for local governments to ensure long-term financial security. Municipalities with higher bond ratings have correspondingly lower interest rates that result in greater cost-savings over time, especially when issued to finance larger projects. The result? More funds to complete projects without having to raise taxes. For example, for the City of Kirkland, the AAA rating means that the cost of borrowing for the planned debt issuance of $42.5 million is approximately $888,000 less than it would be if the City had an AA rating.