A communication transmitted from Yi-An Huang, City Manager, relative to the City of Cambridge retaining its AAA rating from the nation's three major credit rating agencies

20 FEB 2024 Fitch Rates Cambridge, MA's $180.1MM Series 2024 GO Bonds 'AAA'; Outlook Stable Fitch Ratings - New York - 20 Feb 2024: Fitch Ratings has assigned a 'AAA' rating to the city of Cambridge, Massachusetts $180,100,000 general obligation (GO) municipal purpose loan of 2024 bonds. Proceeds of the bonds will be used to finance various city, sewer and school related projects. The bonds are scheduled to sell competitively on March 6, 2024. Fitch has also affirmed the rating for the city's outstanding GO bonds totaling approximately $523 million at 'AAA' and the city's Issuer Default Rating (IDR) at 'AAA'. The Rating Outlook is Stable. SECURITY The bonds are a general obligation of the city and are backed by its full faith and credit and a property tax levy that is limited by state statute. ANALYTICAL CONCLUSION Cambridge's 'AAA' GO bond rating and IDR reflect Fitch's expectation for it to maintain a high level of financial flexibility through economic cycles, consistent with a history of strong operating performance and budget controls. The rating further reflects the city's robust resource base and future potential for continued tax base increases, along with manageable expenditure growth and demonstrated ability to reduce expenditures during economic downturns, and a low long-term liability burden. Economic Resource Base Cambridge is located in Middlesex County across the Charles River from the city of Boston and has an estimated 2022 census population of 118,488, which is up approximately 13% since 2010 outpacing the state and nation over the same period. KEY RATING DRIVERS Revenue Framework: 'aaa' Revenues are derived primarily from property taxes and total annual general fund revenue growth over the past 10 fiscal years and has exceeded U.S. GDP rates, reflective of strong growth in Cambridge's economy and tax base. Prospects remain strong for future economic advancement. The

city maintains significant excess levy capacity under the state's Proposition 2 1/2 law, providing for a high legal ability to raise revenues. Expenditure Framework: 'aa' The natural pace of spending growth is expected by Fitch to be in line with or slower than natural revenue growth over time. Carrying costs for debt and retiree benefits claim a moderate proportion of governmental spending. Fitch expects carrying costs to remain moderate even with future debt issuances and budgeted annual increases in other post-employment benefit (OPEB) and pension contributions. The city maintains strong legal control over headcount and other key employment terms as provided by state statute. Long-Term Liability Burden: 'aaa' Cambridge's direct debt, net of water and sewer debt paid from user charges, and Fitch-adjusted net pension liabilities (NPL) are low at approximately 7% of residents' personal income. Fitch anticipates Cambridge's long-term liability burden will remain below 10% of personal income levels (the high end of the range for an 'aaa' assessment) based on expected growth in the city's population and personal income, future debt plans, and a rapid pace of principal amortization. OPEB liabilities compared to personal income are high when compared to debt and NPLs, but management is actively managing these costs. Operating Performance: 'aaa' Careful expenditure management combined with moderate tax levy increases that have aligned with tax base changes and conservative financial forecasting have led to the maintenance of healthy reserves over the past several years. Fitch expects the city will continue to demonstrate a superior level of gap-closing capacity and maintain a high level of fundamental financial flexibility throughout future economic cycles. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: --Not applicable given the 'AAA ratings. Factors that could, individually or collectively, lead to negative rating action/downgrade: --A sustained increase in long-term liabilities above 10% of personal income; --A sustained increase in expenses outpacing changes in revenues leading to a decline in unrestricted reserves closer to or below 10% of spending and reducing overall financial flexibility. CURRENT DEVELOPMENTS Cambridge's financial profile remains very strong. General fund net operating results for fiscal 2023 reflect a $4.4 million net-operating surplus (0.5% of spending), increasing the city's unrestricted fund

balance to $320 million from $317 million, or a healthy 38% of spending. Results include transfers out of $20 million for capital projects, following positive variances in both revenues and expenditures. Tax base values for fiscal 2023 were up 11% yoy due to new development and improved overall valuations, notwithstanding higher office vacancy rates compared to pre-pandemic levels, contributing to growth in property tax revenues. The fiscal 2024 $884 million general fund budget is up $82.3 million or 10% over the fiscal 2023 adopted operating budget. A significant portion of the increase represents a shift of funding for the Affordable Housing Trust from the capital budget to the operating budget, excluding that shift, the city's operating budget increased approximately 7%. Other budget increases are attributable to employee salary and benefit costs, and a $2 million allocation to the OPEB liability trust fund. The tax levy is up 8.2%, reaching $575.4 million. In addition, the budget includes a $10 million appropriation from the debt stabilization fund, similar to fiscal 2023, and is being used to support debt service related to the elementary school reconstruction. This fund is reported as a committed fund in the general fund. Fiscal 2024 total assessed values (TAV) continue to grow and are up 7% yoy. Commercial and industrial properties represent 45% of the city's fiscal 2024 TAV. Office vacancy rates were 12.5% for third quarter 2023 up from 8.7% for third quarter 2022 according to CB Richard Ellis (CBRE) reports. These rates compare less favorably to the 4% vacancy rate reported at the start of the pandemic, however they remain more favorable than national averages, which stood at 19% at the end of the fourth quarter 2023, CBRE reports. CBRE also reports an average gross asking rent of $76.28 per s.f. during third quarter 2023, a 10% decline YOY. Growth in TAV related to new development and higher valuations for other segments of properties has offset the slight declines in certain office properties. While Cambridge is not immune to changes in the office market, these vacancy rates will be influenced by the level of new office space coming into the market, particularly higher tier properties; and, as demand for lab space remains very active, class B office space has been undergoing conversions to lab space. YOY lab vacancy rates remain very low at 5% for the third quarter of 2023. New development and construction activity for office, lab, residential and mixed use has not slowed down as evidenced by robust building permit activity in fiscal years 2021, 2022, and 2023. Fitch expects long-term demand to be sound due to Cambridge's central location near the city of Boston, Cambridge's importance as a research center for life and sciences companies, and the presence of the country's leading institutions of higher education, Harvard and MIT. CREDIT PROFILE The city is an important economic component of the Boston metropolitan area and Massachusetts as a whole and benefits from the presence of both Harvard University and Massachusetts Institute of Technology. These institutions are the city's top two employers and other major employers include the city itself, Mt. Auburn Hospital and a number of biotechnology companies including Takeda Pharmaceuticals, Biogen, Novartis, and Sanofi. Cambridge continues to strengthen its position as a national leader in the life sciences and high-tech

sectors. Expansion in these sectors has contributed to notable tax base, employment and resident income growth over the past several years and is projected by the city to continue for at least the near term. Wealth levels are above state and national averages and the unemployment rate (2.5% as of December 2023) is consistently below them. Cambridge also continues to attract research and development companies, ranging from startups to international companies. Several major software and internet companies have established research and development operations in Cambridge, including Microsoft, Google, Amazon, and Facebook. While space for new development is somewhat limited in Cambridge, new construction or rehabilitation of existing properties is underway in various areas of the city and should provide support for demand. TAV performance reflects this activity as well as growth in residential values. TAV of $76 billion for fiscal 2024 on a per capita basis is a very high $640,000. Economic development districts located in the city continue to provide opportunities for current and future economic expansion and new housing opportunities. The city is projecting more moderate increases in TAV through 2028, which Fitch considers reasonable based on higher than usual office vacancy rates and new commercial and residential construction underway and proposed. Revenue Framework Property taxes account generally for two-thirds of general fund revenues. Intergovernmental revenues, primarily for education, and sewer use charges, accounted for another 9% and 8%, respectively, for fiscal 2023. Excise taxes on hotel, meals and motor vehicles and payment in lieu of taxes provide an additional moderate source of general fund revenues. Fitch expects revenue growth to continue to be strong based on the city's solid underlying economic fundamentals and expectations for future tax base growth from new commercial and residential projects. Pursuant to state law, Proposition 2 1/2 limits the city's ability to levy property taxes by: 1) a 'levy ceiling', an absolute cap on the level of property taxation, set at 2.5% of the overall property tax valuation (primary limit); and 2) a levy limit which restricts the annual growth in taxation to 2.5% over the previous year's levy plus the value of new growth (secondary limit). Taxation in excess of the levy limit (plus any new growth) requires voter approval. Management has typically levied below the ceiling each year. Any excess in levy capacity is carried forward and available for use at any time. The city's excess tax levy limit is approximately $198.5 million, down slightly from $201 million in fiscal 2023, the highest historical level. This excess levy capacity totals approximately 23% of the fiscal 2024 operating budget and provides for high revenue raising flexibility if needed. Expenditure Framework Education is the city's largest expenditure, comprising 33% of fiscal 2023 general fund expenses. Public safety followed at 22% of expenditures.

General fund expenditure growth has historically been in line with or below the pace of revenue growth and the city has solid flexibility to reduce expenditures if necessary. Fitch expects expenditure growth to be driven by an increase in population and services but remain aligned with or slightly below revenues going forward. Carrying costs for debt service, pensions and OPEB contributions were moderate at 16% of fiscal 2023 total governmental spending, and Fitch expects such costs to remain moderate going forward. Employee salary and benefit costs as well as moderate annual increases in debt service continue to drive annual expenditure increases. Debt service costs will trend upward based on plans for additional debt to finance various schools, sewer and other city projects. Principal amortization rates are above average as management's policy limits the term of school related debt to 20 years and all other debt to 10 years. The carrying cost metric includes debt service costs for GO sewer debt for which the city levies user charges, suggesting the actual burden on Cambridge's general government budget is somewhat lower. Education will continue to be a driver of spending and management is planning higher annual increases in education spending over the next four years as part of its commitment to the overall improvement of its school system. A majority of the city's employees belong to a union or collective bargaining group. Management has the ability to impose employee layoffs and furloughs if necessary. Public safety contracts are subject to arbitration, although the city council has the ability to vote down an award. In such a case, both parties continue to bargain within the arbitration process. Long-Term Liability Burden Long-term liabilities for net overall debt plus Fitch-adjusted NPLs are low at 7% of estimated personal income. Outstanding debt, net of self-supporting water and sewer debt, accounts for 75% of the liability metric, with the city's NPL making up the remainder. Fitch expects the burden to remain low as a percentage of personal income based on pension funding practices, future debt plans and expectations for future growth in population and residents' personal income. Management is projecting the issuance of $731 million in additional debt (about 5% of current personal income) through 2028. Roughly 28.6% of this debt is expected to be supported from user fees which Fitch considers self-supporting. The new debt will be partially offset by the principal repayment of bonds and notes outstanding. Principal amortization of outstanding GO debt including sewer debt is rapid at 83% over the next 10 years (fiscal years 2024-2034). The city is one of four employers participating in the Cambridge Retirement System. The city consistently funds at least its full actuarially determined contribution and the current actuarial schedule for pension funding has the city reaching full funding of its net pension liabilities by 2026. The fiduciary net position to total pension liabilities for the system was reported at 85% as of Dec. 31, 2022 based on a 7.1% discount rate. Using Fitch's more conservative 6% investment rate of return, the estimated assets to liabilities ratio was 75%.

The city's net OPEB liability totaled $790 million as of June 30, 2023, based on GASB 74 reporting requirements, and represents 5.5% of personal income. The liability was determined using a blended 3.74% discount rate. City management created an OPEB trust fund in December 2009 and has made contributions since that time with a current value of $36.4 million. Management projects a $2 million annual contribution to the trust for each fiscal year 2024 through 2026 and plans to ramp up contribution in fiscal 2027 after reaching full pension funding status in fiscal 2026. Operating Performance Fitch expects the city to maintain a high level of financial resilience throughout economic cycles given its historically strong revenue performance, conservative budgeting practices and superior degree of inherent budget flexibility. The steady growth in revenues has supported surplus operations over the past several fiscal years with transfers out primarily used to support capital spending. The city has historically maintained reserves at strong levels, supporting its high level of financial flexibility. During times of economic weakness, management has controlled spending and staffing levels to offset reductions in revenues and Fitch expects management will continue this practice during future downturns. The city's strong budget monitoring practices and financial planning bolster the city's operating profile. In addition to the sources of information identified in Fitch's applicable criteria specified below, this action was informed by information from Lumesis. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. ESG Considerations The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores. Fitch Ratings Analysts Arthur Tildesley III, CFA Director Primary Rating Analyst [phone removed] Fitch Ratings, Inc. Hearst Tower 300 W. 57th Street New York, NY 10019 Kevin Dolan Director

Secondary Rating Analyst [phone removed] Eric Kim Senior Director Committee Chairperson [phone removed] Media Contacts Sandro Scenga New York [phone removed] [email removed] Rating Actions ENTITY/DEBT RATING RECOVERY PRIOR Cambridge (MA) [General Government] LT IDR AAA Affirmed AAA • Cambridge (MA) /General Obligation - Limited Tax/ 1 LT LT AAA Affirmed AAA RATINGS KEY OUTLOOK WATCH POSITIVE NEGATIVE EVOLVING STABLE

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