Even with a recession, rising unemployment, declining state aid and high home foreclosure rates in some neighborhoods, the city of Minneapolis still earns high marks for financial strength and stability from municipal bond-rating agencies.
On Monday, the city sold $48 million in General Obligation debt primarily to refinance existing variable rate debt. Fitch Ratings scored the debt AAA, its highest rating, while Moody’s gave the debt its second-highest rating, Aa1. Both firms issued their ratings last week, prior to the sale.
“The city’s ‘AAA’ rating reflects its broad economy, strong and consistent financial performance, prudent long-term planning, and moderate tax-supported debt levels. The primary risk to the city continues to be reductions in state aid, which occurred in 2008 and 2009 and are likely to continue,” Fitch said in a prepared release.
“Despite recent challenges that reflect the nationwide economic recession, Moody’s believes that Minneapolis will continue to retain its economic pre-eminence as a diversified Midwestern urban center,” the agency said in its release.
Melanie A.J. Shaker, director at Fitch, noted that Minneapolis and Columbus, Ohio, are the only two large cities in the Midwest that currently have the top rating. “It’s difficult to maintain a triple-A rating, even in a good economy,” she said. “It’s that much more difficult in a challenging economy.”
The Fitch rating cited, among other factors, an 11 percent increase in property taxes as well as expenditure cuts the city plans for 2010 to offset cuts in state aid. “We look for operating balance between revenue and spending. It’s a policy question at the local level as to how that balance is achieved,” she added.