Austin is now the only major Texas city with perfect credit ratings. Here's why it matters

Austin has become the only major Texas city to hold the highest possible credit rating from all three leading rating agencies, a distinction that could help the city secure lower borrowing costs as it prepares to finance several major infrastructure projects.

Moody's Ratings upgraded Austin's overall credit rating and general obligation debt rating from Aa1 to Aaa, according to a memo sent Friday to the mayor and City Council. Austin already held top AAA ratings from S&P Global Ratings and Fitch Ratings.

Credit ratings measure a borrower's ability to repay its debts. Stronger ratings generally reduce risk for investors and can allow governments to borrow money at lower interest rates.

Moody's raised Austin's issuer rating from Aa1, its second-highest grade, to Aaa. The upgrade means Austin now holds the highest possible rating from Moody's, S&P Global Ratings and Fitch Ratings. 

The agency also upgraded Austin's general obligation debt from Aa1 to Aaa, along with other upgrades to ratings on debt supported by hotel occupancy taxes, the city's water and wastewater system and annual city appropriations.

Austin's general obligation debt ratings, which are indicative of overall credit ratings, exceed those of Texas' other largest cities.

As of last year, San Antonio held the highest rating from Moody's and S&P but an AA+ rating from Fitch. Houston's general obligation debt was rated Aa3 by Moody's and AA by both S&P and Fitch as of last year.

Moody's upgraded Dallas' general obligation credit rating last month but it's still A1 – the fifth-highest ranking. It has an AA- rating from S&Pas of last year and an AA rating from Fitch as of 2024.

The agency cited Austin's large and diverse economy, anchored by state government and the University of Texas, as well as the region's continued technology-sector growth.

Moody's also credited the city with taking steps to reduce long-term pension and retiree health care liabilities.

Those changes included increasing contributions toward older pension obligations, trying contributions to actuarial calculations, creating lower benefit tiers for newer employees and requiring eligible retirees to enroll in Medicare Advantage plans at age 65. 

Moody's also cited rising city revenue and what it described as "prudent financial management." 

Austin expects to assume substantial additional debt as it expands Austin-Bergstrom International Airport, redevelops the Austin Convention Center and upgrades water and wastewater infrastructure. Moody's noted, however, that each project has a dedicated revenue source to repay the debt.

The agency assigned Austin a stable outlook, indicating that it does not expect to change the rating in the near term. Moody's said continued economic growth and utility rate increases should generate enough revenue for the city to maintain its financial position as its debt grows.

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