Minneapolis earns top credit ratings, helping save $13 million in the coming years
The City of Minneapolis has again been assigned top credit ratings by all three ratings services, despite financial obstacles facing both the public and private sectors in this challenging economy. As a result of the high ratings and low interest rate environment, the City was able to finalize $91.42 million of bond sales and refundings this week, leading to interest savings of $13 million in the coming years.
The City sells bonds periodically to finance capital projects, including sewer and water system improvements, street paving, lighting and traffic signal improvements, public facilities, etc. The refundings work similarly to the way a person might refinance a home, meaning the City refunds bonds it sold years ago by selling new bonds at lower interest rates. Because of the City’s high credit ratings, the City was able to secure better rates on a number of previous bond sales, leading to the $13 million in savings over time.
Prior to the bond sale, Fitch Ratings, Moody’s and Standard and Poor’s Ratings Services assigned the City of Minneapolis triple AAA ratings, the highest ratings possible. Moody’s praised the City’s “well-managed financial operations” while Fitch said that Minneapolis "benefits from conservative financial management resulting in stable financial performance," and noted that "management has prudently dealt with potential budgetary challenges."
In the last several years, City leaders have taken significant steps to streamline City services, find efficiencies and address financial challenges. Long-term financial planning has maintained City reserves and assures that ongoing expenses are supported by ongoing revenue. Each year, the City plans five years in advance and implements streamlining and reductions to planned growth. City leaders have also cut the City’s debt burden significantly in the last several years.
Highlights from the sales and refundings include:
$37.5 million Various Purpose Sale to Citigroup Global Markets, Inc. (new bonds for capital projects plus two small refundings of existing bonds)
New bonds – $31.4 million at a True Interest Cost of .48 percent
Refundings of two existing bond series – $6.1 million ($1.5 million at a True Interest Cost of .58 percent, and $4.6 million at a True Interest Cost of 1.39 percent) and savings of $.9 million
$28.86 million Library Bond Refunding to Robert W. Baird & Company, Inc. at a True Interest Cost of 1.99 percent and savings of $6.2 million
$22.06 million Parking Assessment Bond Refunding to Citigroup Global Markets, Inc. at a True Interest Cost of 2.16 percent and savings of $5.2 million
$3 million Tax Increment Refunding Bonds (Heritage Park) to J.P. Morgan Securities, LLC at a True Interest Cost of 2.36 percent and savings of $.7 million
Published Sep. 27, 2012