What are Bond ratings?

Bond ratings reflect the relative strength of the government’s financial management and planning capabilities, the quality of its elected and administrative leadership, as well as its wealth and social characteristics. Bond ratings serve as a statement of a locality’s economic, financial and managerial condition and represent the business community’s assessment of the investment quality of a local government. Highly-rated bonds are more competitive in the market and thereby help lower interest costs paid by residents. High‐grade ratings reduce the cost of raising capital for projects and create a substantial savings for the taxpayers.

The cost of obtaining a bond rating must be weighed against the anticipated benefits (reduced interest rates) in order to determine whether or not the local government should have their bonds rated. General obligation bonds are the most likely type of bonds to be rated, while SID bonds are rarely rated.

Montana Municipal Officials Handbooks 3rd Edition, Section 5.204