Moody's Investors Service upgraded Yonkers, N.Y.'s general obligation bonds to A3 from Baa1 May 12.
Simultaneously, it upgraded the Yonkers school district's enhanced rating to A2 from A3.
The city and the school district have a total of about $500 million in debt outstanding, according to Moody's.
Moody's has a stable outlook on the ratings.
Moody's did the upgrade because the city has improved its financial management. New legislation has given city managers greater control over the board of education's finances. The rating takes into account a slim financial position and a manageable debt profile.
Moody's assistant vice president Robert Weber and vice president Malcolm Thompson said the rating also took into account the decline of a sizeable tax base over the past five years but a tax base that is expected to grow in the long term.
The A2 rating is based on the added security provided by New York's school debt intercept program.
