A general obligation bond (GO) is a municipal bond backed by the credit and taxing power of the issuing jurisdiction rather than the revenue from a given project. General obligation bonds are issued with the belief that a municipality will be able to repay its debt obligation through taxation or revenue from projects. A GO bond is secured by the issuers pledge to use all available resources — even tax revenues — to repay holders of the bond. General obligation bonds are usually used to fund government projects that will serve the public community, such as the $200 million Parks and $100 million Public Safety bonds that were approved by voters in 2019.
The GO bond rating offers insight into the City’s financial strength and is an indicator to the safety and stability of an investment for potential investors. The bond rating is issued by a rating agency with the purpose to provide information that makes it quicker for market participants to evaluate risk. A bond’s credit rating is the rating agency’s opinion as to the creditworthiness of the bond’s issuer. The higher the credit rating, the better the credit quality, indicating a safer, more stable investment and lower interest rates for the issuer.
The highest rating issued by Standard & Poor's is AAA. The grades AAA, AA, and A are considered investment grade, or of high quality.
The highest rating issued by Moody’s Investors Service is AAA. The grades AAA, AA and A, indicate low credit risk. Moody’s also adds numerical modifiers to the rating. The modifier 1 indicates that the rank is in the higher end of the generic rating category, while 2 indicates mid-range, and 3 at the lower end.
