Ann Arbor retained S&P Global Ratings’ highest credit rating for $10 million in bonds intended to finance improvements to city parks.

S&P assigned the Series 2026 capital improvement bonds an AAA rating with a stable outlook Nov. 5, according to the city’s Nov. 10 announcement.

The City Council authorized borrowing up to $10 million Nov. 5. The resolution identifies the Park Maintenance and Capital Improvement Millage as the source for repayment of principal, interest and issuance costs.

The rating continues Ann Arbor’s AAA standing following its upgrade from AA+ in 2024.

Financial strengths

In its Nov. 5 report, S&P cited Ann Arbor’s budgeting and oversight practices, history of operating surpluses and ability to manage its debt.

The agency identified the University of Michigan as an important source of economic stability. It also reported that the city’s defined-benefit pension plan was approximately 98% funded as of June 30, 2025.

According to S&P, the city has historically contributed more than actuarial calculations required toward pensions and other retiree benefits.

Budget projections

The fiscal 2026 general fund budget anticipated using $7.4 million in reserves. City management instead expects a $377,000 operating surplus, S&P reported.

The agency attributed the improvement to property tax revenue exceeding expectations and spending below budget for personnel, utilities and professional services.

For fiscal 2027, the budget assumes a $5.8 million reserve draw. S&P said it expects at least a break-even result based on the city’s history of outperforming its budgets. These are projections rather than final results.

Borrowing costs and risks

The city said the AAA rating helps it seek favorable borrowing terms. The announcement does not identify a final interest rate or a specific amount of savings.

S&P said larger-than-expected borrowing, a materially weaker financial position or deteriorating funding for pensions and other retiree benefits could lead to a downgrade.

The report also identified approximately $28 million in additional borrowing expected under the city’s capital improvement plan.

S&P viewed voters’ rejection of Proposal E, the municipal electric utility proposal, as potentially avoiding acquisition costs and financial and operational risks.

The stable outlook reflects the agency’s expectation that Ann Arbor will maintain a strong financial position.