Fitch Ratings announced an upgrade to the city of Gainesville’s credit rating on Friday in a report. 

Gainesville’s series 2020 special obligation revenue bonds, series 2014 capital improvement revenue bonds, and series 2003A and 2003B pension obligation bonds have been upgraded from ‘AA-‘ to ‘AA’, and Fitch also affirmed the city’s Issuer Default Rating (IDR) at ‘AA’. 

The rating outlook is “Stable” and the IDR and bonds have been removed from Under Criteria Observation. 

“This credit rating upgrade for the City of Gainesville is excellent news and reinforces we’re moving in the right direction,” Mayor Harvey Ward said in the release. “City Manager Cynthia W. Curry is leading dedicated teams in budget and finance who are making prudent decisions, reducing spending and maintaining a healthy fund balance to provide security and stability for all our neighbors.” 

Credit ratings are key in determining the city’s interest rate on its infrastructure borrowing, and the upgrade indicates Fitch’s confidence in Gainesville’s financial health, according to the press release. 

The Fitch review stated that the credit rating agency believes the city has “the tools to address” budgetary impacts from more reductions in the Gainesville Regional Utilities (GRU) transfer to the city budget. 

The General Services Contribution (GSC), transferred annually from GRU, has been declining since 2021, and dropped steeply most recently, from $34 million in Fiscal Year 2023 to $15.3 million in Fiscal Year 2024, a 55% reduction. 

Fitch praised the city for reduced material expenditures and increased tax rates to maintain “financially balanced operations.” 

“In spite of these significant revenue reductions, the city continues to demonstrate a commitment toward maintaining strong financial resilience, and Fitch expects the city will adjust as needed in response to additional changes in its revenue profile,” the report states. 

As factors that could lead to a rating downgrade, the report lists sustained budget imbalances that lead Fitch to expect available general fund reserve levels to be maintained below 10% of spending, and/or a sustained increase of about 100% in long-term liabilities associated with debt and pensions, without a corresponding increase in personal income and government resources. 

The report also names two factors that could lead to a further upgrade: sustaining long-term liabilities at or below current levels without a decrease in personal income and governmental resources, and/or improved median household incomes, relative to the nation, driven by “improved demographic metrics in the city’s non-student population.” 

This is the city’s first rating under Fitch’s new U.S. Public Finance Local Government Rating Criteria. 

“In the face of hurdle after hurdle, staff from every department have stepped forward with true professionalism,” Curry said in a release. “We have economized together. We have worked together without pause. We have carried out critical decisions to streamline and improve city operations in the face of adversity, and this is a result of that determination.”