by Mark McDermott
The City of Manhattan Beach has reaffirmed its elite AAA credit rating. S&P Global Ratings last week issued a report confirming that the City’s finances have again earned its highest stamp of approval.
“Our ratings reflect the city’s strong financial management policies, healthy available reserve position, affordable long-term liability profile, and favorable economic metrics, including extremely high local income metrics,” the S&P report said. “The city has reported nearly balanced or positive operations in each of the past four fiscal years, supported by conservative budgeting practices and steady growth in its primary revenue sources, property taxes (43% of fiscal year 2024 general fund revenue) and sales taxes (11%).”
AAA credit ratings are relatively rare among municipalities. Manhattan Beach is one of 51 California cities to maintain a AAA rating from S&P. El Segundo is the only neighboring city with a AAA rating. Manhattan Beach first earned this distinction in 2002. The City was preparing to build its new police and fire stations as part of the Metlox project and applied for AAA rating to lower borrowing costs. More recently, its AAA rating enabled Manhattan Beach to save money on its long-term employment retirement costs through the issuance of Pension Obligation Bonds (POB).
Mayor Amy Howorth said the rating is an achievement made possible both by good governance and community oversight.
“This AAA rating reaffirmation is a direct result of our community’s commitment to responsible financial management and long-term planning,” said Mayor Amy Howorth. “It validates our strategic approach to budgeting, debt management, and maintaining strong reserves while continuing to provide exceptional services to our residents.”
S&P performs a thorough analysis of the City’s operations. Its report noted that despite a recent dip into deficit spending, the City’s recent actions — particularly the sales tax residents approved last year — ensure long-term stability.
“A surplus of roughly 6% (of revenues) is projected for 2026, driven by continued revenue growth and the approval of Measure MMB, a new permanent sales tax measure expected to generate $5.9 million annually,” the report said. “City officials report no plans to materially reduce the city’s fund balance.”
“The AAA rating is more than just a financial benchmark—it demonstrates our entire organization’s dedication to fiscal excellence and transparent governance,” said City Manager Talyn Mirzakhanian. “This rating ensures that when we invest in critical infrastructure projects or community improvements, we do so with the most favorable financing terms possible, ultimately saving taxpayer dollars and strengthening our community’s future.”
Finance Director Libby Bretthauer said the POBs are an example of how the AAA enables the City to save significant money over time.
“Our Pension Obligation Bonds are rated as AAA, and so a higher rating makes the bonds more desirable to investors, which creates more demand, which lowers the interest rate that we’re paying,” Bretthauer said.
Bretthauer said this is the third time since 2016 the City has gone through the AAA reaffirmation process.
“Of course we are pleased with the outcome,” she said.
The current application with S&P Global was done in order to finance the City’s purchase of the former US Bank property in downtown Manhattan Beach. The Council approved the $13 million purchase in June.
“We’re issuing certificates of participation to replenish our general fund balance for the acquisition of that property,” Bretthauer said.
Councilperson Steve Charelian, who was a City employee for 35 years within the finance department and served as its director from 2018 until his retirement last year, said the POBs are a good example of why maintaining a AAA rating is crucial for the City. He brought the POB idea to the Council in 2020 and it was approved in 2021. The City was able essentially refinance its $91 million in pension debt, taking advantage of low interest rates and reducing borrowing costs from 7 percent CalPeRS rate to a 3.1 fixed interest rate of a POB. This saved the City well over $30 million.
“We were able to do our pension obligation bonds in June of 2021,” he said. “And that was reaffirming AAA right out of the pandemic, which was probably the most challenging [reaffirmation], and one of the most beneficial, because it allowed us to save almost $40 million in future pension debt.”
Bruce Moe, the former longtime finance director and city manager, is usually credited with beginning Manhattan Beach’s process of becoming a AAA and then helping maintain it over two decades. When he retired last year, Moe deferred such credit.
“The financial stability of the City — it’s not that I made that happen, but I was responsible for not blowing it, making sure I didn’t screw it up,” Moe said. “We’ve made a number of financial moves over the years, like getting the AAA bond rating before we sold some bonds for the police and fire facility. That was a big thing. We’d never gone out to the bond rating agencies to get a rating like that, and AAA is as good as you can get. It was a struggle to get Standard & Poor’s, Moody’s, and Fitch, we had all three give us that AAA rating.”
Bretthauer said achieving the AAA rating to begin with is a challenge, and Moe deserves credit for both that and creating the blueprint for how to maintain it through the years.
“Once you achieve it, then it is, ‘Okay, now we just maintain our policies and procedures, stay the course, and remain conservative in our revenue and budget projections,’” she said. “And, like Bruce said, don’t screw it up. You follow the formula, and we’re good.”
That formula, of course, touches on every aspect of city government, from its budgeting practices to its transparency and revenue projections.
“Our financial policies are the foundation to all of our decisions,” Bretthauer said.
The City Council and finance department have in recent years been particularly proactive in cleaning up any areas of unsustainability within the City’s fiscal house, particularly when former councilpersons Steve Napolitano and Richard Montgomery returned to serve two more terms beginning in 2017. The City was subsidizing its storm drain operations — which is supposed to be paid for through a self-sustaining enterprise fund generated by property taxes, but the rate increase to the fund faced a cumbersome electoral process, hence the fee rate had not increased since 1996. The subsidy had grown to almost $2 million per year, with a projected $11 million in costs projected over the next six years. The Council put a rate increase to a citywide mail-in ballot election and a rate increase was approved in 2024. That same year, the Council successfully sent Measure MMB to the polls, approving a sales tax increase that generated $5.3 in new revenue to address capital projects.
Without these revenues, the City would have had a much more difficult time retaining its AAA rating.
“We wouldn’t be having this conversation,” Charelian said.
Charelian said the city staff and leaders certainly deserve credit for the AAA rating, but ultimately residents have made it possible.
“Yes, we did have strong financial management within the City,” he said. “But the bottom line is we needed taxpayers and voters to help pass certain initiatives to help us reach where we are. I want to give credit where credit is due.”
Charelian noted that residents play another underrated role in this process.
“A lot of our bonds are purchased by Manhattan Beach residents,” he said. “We are a AAA rated city, so those bonds get scooped up pretty quick. We’re very proud of that.”
He also said that Moe’s contributions should not be underestimated.
“I was there in the trenches. I know he doesn’t take credit,” Charelian said. “I’m the same way. You know, we both live and breathe Manhattan Beach. But he deserves a lot of credit. He was the wind behind the sails of finance. That’s a good quote, he didn’t ‘screw up,’ but he definitely initiated this process, and was able to hand it down to me, and I handed it down to Libby. It was beautiful succession planning to continue the City’s financial stability and all the things that go with being a AAA city.”
And, of course, Charelian said to make sure Henry Mitzner, the 47-year City employee who retired in 2020, was given some credit. Mitzner was, officially, the city controller, and unofficially, its philosopher-at-large, who in both capacities helped shape the finance department’s conservative ethos.
“He was just very wise and helped set the tone,” Charelian said. “Don’t forget Henry.” ER
