Interest rates are about to get better for the city of Bainbridge Island.

Bainbridge’s credit rating was upgraded by Moody’s Investors Service this month.

“We are pleased that Moody’s has recognized the progress we have made over the past few years in building healthy reserves while maintaining prudent stewardship of the city’s services and assets,” said Bainbridge Island Finance Director Ellen Schroer.

Following a periodic review, the city’s long-term rating was raised from Aa3 to Aa2 in Unlimited Tax General Obligation bonds.

Moody’s also upgraded the city’s Limited Tax General Obligation bond rating from A1 to Aa3.

The new ratings, Moody’s stated, reflect Bainbridge’s economic and financial profile.

This includes strong financial practices that constitute a formal reserve policy and conservative budgetary policies.

It also takes into account three consecutive fiscal years of surpluses and a healthy general fund — even while considering plans to draw down reserves for upcoming capital improvements.

Bainbridge’s general fund revenues rely mostly on property and sales taxes, which can be volatile, Moody’s further noted. This underscores the importance of the city’s reserve policies.

Moody’s also said that Bainbridge’s 2014 tax base is on a stabilizing trend after suffering a cumulative decline from 2010 to 2013 that exceeded 25 percent.

These factors, among others, ranked Bainbridge’s debt obligations high quality and subject to low credit risk.

The new credit upgrades set Bainbridge in a position for better interest rates when issuing future bonds.

For more information on the city’s bond rating, email finance@bainbridgewa.gov or call 206-780-8668.