CHAMPAIGN — Despite investors' wavering confidence in the nation's and state's ability to pay their bills, the city of Champaign is maintaining its high credit rating.

Fitch Ratings this week affirmed the city's AAA credit rating, which is the highest attainable by a government agency and keeps interest payments low when the city issues debt.

The city owes $77.4 million on its general obligation bonds, a manageable number for a city the size of Champaign. Municipal bonds are essentially how a government agency takes out a loan; the city sells bonds to investors to pay up-front for capital projects and slowly re-pays the investors — plus interest — over a number of years.

Much of the city's debt has been issued during the past six years. In 2005, city officials sold $24 million worth of bonds to pay for the new library building. Of that, it has paid down $2.5 million of the principal amount and will make another $1.25 million payment this year, said Finance Director Richard Schnuer.

In 2010, the city borrowed $25.6 million to pay for storm-water drainage improvements. The full outstanding balance remains until the city makes a payment this year. In December, the city will make its first principal payment on the $12.7 million it owes for the Hill Street parking garage.

In affirming the city's high credit rating, Fitch Ratings cited the stability of the local economy, the city's diverse revenue stream and a healthy surplus as driving factors.

A separate agency, Moody's, also gives the city of Champaign its highest rating, but it announces ratings on a different schedule.

A high credit rating lets investors purchase bonds with more confidence in the city's ability to pay them back. That keeps the interest payments low and ultimately puts less burden on taxpayers for expensive projects. An overhaul of the John Street storm sewer, for example, would be more expensive if the city had a lower credit rating.

While $77.4 million in debt is a manageable number, city officials have expressed reluctance to go any higher. There might still be more room for debt, Schnuer said, but not without some risk.

"The biggest (issue) is that we have to have the revenue stream to pay the debt service," he said, "and we don't have that now, unless we were to cut other services."

Another problem is that, even if the city could afford more debt, it is hard to predict the future. It is a lot like someone's personal finances, Schnuer said: Maybe you can afford your mortgage payments now, but what happens if somebody in your household loses a job or needs to make unexpected payments on medical bills?

"You don't want to have so much of your income used for a purpose that is completely inflexible," Schnuer said. "You're legally obligated to make those (bond) payments, so you don't have the ability to adjust those payments if the need arises."

That has forced officials to look for other ways to pay for unfunded infrastructure improvements.

Next week, the city council is scheduled to consider a 4-cent gas tax to raise money for a $60 million backlog of road projects. Later this month, council members will consider a storm water fee, which would build revenue for an $80 million list of unfunded drainage projects.