Minneapolis’ high credit ratings help save $6.34 million in the coming years
The City of Minneapolis has again been assigned some of the highest credit ratings of cities in the country. As a result of the high ratings and low interest rate environment, the City was able to sell five series of bonds totaling $76.905 million today, leading to future debt service savings of $6.34 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. Refunding bonds 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.
Prior to the bond sale, Fitch Ratings and Standard and Poor’s Ratings Services assigned the City of Minneapolis triple AAA ratings, the highest ratings possible. Moody’s affirmed the City’s Aa1 rating, which is its second-highest rating, placing Minneapolis among the top-rated cities and local districts in the country. Less than 10 percent of jurisdictions, and just a handful of major cities, have a Aa1 rating or higher from Moody’s.
In giving Minneapolis a top rating, Fitch noted that the City has strong financial fundamentals, stating that “the city consistently exhibits stable financial performance.” Standard and Poor’s reported that “We view the city's management conditions as very strong, with strong financial practices,” and Moody’s noted the City’s “well managed financial operations” and relatively conservative levels of debt.
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 allowed the City to maintain strong financial reserves and assures that ongoing expenses are supported by ongoing revenue. City leaders have also cut the City’s debt burden significantly in the last several years.
Highlights from the five series of bonds include:
- $37.68 million Various Purpose Bonds sold to Hutchinson, Shockey, Erley & Co. for new capital projects at a true interest cost of .98 percent.
- $17.93 million Library Referendum Refunding Bonds also sold to Hutchinson, Shockey, Erley & Co. at a true interest cost of .98 percent. With use of $2.225 million of cash on hand, this refunding resulted in debt service savings of $5.83 million.
- $13.035 million Improvement Bonds for various special assessment projects sold to Robert W. Baird & Company, Inc. at a true interest cost of 2.47 percent. A portion of this sale ($500,000) along with $1.50 million of cash on hand was used to refund bonds resulting in debt service savings of $510,000.
- $7 million Taxable Various Purpose Park Bonds for Parade Stadium were sold to Robert W. Baird & Company, Inc. at a true interest cost of 3.37 percent.
- $1.26 million Taxable Housing Improvement Area Bonds for Calhoun Place sold to Robert W. Baird & Company, Inc. at a true interest cost of 3.92 percent.
Published Nov. 19, 2013