Debt Service

This allotment is to finance the debt service on all City bonds with the exception of Water, Sewer, and Ice Rink Enterprise debt issues. Funds to cover Enterprise debt service are included in the respective Enterprise Fund Budgets. Funds budgeted in the cost codes below cover debt on a wide variety of projects, including Schools, equipment, street improvements, renovations to public buildings, and improvements to the City’s many recreational facilities.

In May of 2019, Standards & Poor's conducted a credit review and affirmed the City's rating at AA+, continuing to display stability in our City since the last rating in November 2017 and still only one notch shy of the highest rating AAA. From Moody's, the City last received a rating of Aa1 in May of 2018, consistent with the previous assessment in July of 2017. The Aa1 rating is also only one notch shy of the highest rating of Aaa for Moody's. Both reports mention a "strong and growing economy" strengthened by the GLX project through MBTA, as well as our "strong management" and "strong budgetary performance."

PRINCIPAL ON LONG TERM DEBT

This allotment covers the cost of principal payments on the City’s existing bonded debt with the exception of Enterprise debt service, which is included in their respective budgets.

PRINCIPAL ON NOTES

This allotment covers the cost of interest-only payments on the City’s new Bond Anticipation Notes (BANs) with the exception of Enterprise fund BAN interest.

INTEREST

The interest the City pays on Bond Anticipation Notes and bond issues is determined primarily by market conditions, the City’s credit rating, the maturity schedule of the issue, and the supply of bonds at the time of the issue. The overall market interest rates have remained near historic lows for some time and coupled with the City’s strong credit rating have benefited the City with very favorable rates.

Per Massachusetts General Law Chapter 44, the General Debt Limit of the City is 5% of the valuation of the taxable property as last equalized by the State Department of Revenue. Somerville's current legal debt margin is $999,369,230.

DEBT EXCLUSION

The FY22 budget proposal excludes debt service for the Somerville High School reconstruction project from the Proposition 2 1/2 limit. This amount is $6,033,611 and is included in the budget below as a separate line.