Update: Bloomberg has updated the story this morning, with more quotes from locals, including former Mayor Susan Banovetz. The story also looks at other places around the country facing similar problems.
The bond rating for the city of Vadnais Heights has been cut to junk bond status after the city council voted to stop making payments on bonds for the city’s new sports center, reports Bloomberg News.
Said the story:
The eight-step downgrade to Ba1, one step below investment grade, follows similar action by Standard & Poor’s, which lowered the rating a total of 12 levels in July and August.
The council voted to end the city’s lease agreement and stop appropriating funds for the 200,000-square-foot sports center, whose construction was financed by proceeds of a bond sale. Revenue from the complex fell short of expectations, and Vadnais Heights, a community of 12,453, was responsible for making up the difference.
“The city’s failure to appropriate represents a significant lack of willingness to pay on a lease obligation that supported debt issued in the capital markets,” Moody’s analysts said in a report.
Mayor Marc Johannsen, though, told Bloomberg the downgrade is “not fair, and it’s not reflective of the overall financial condition of our city.”
He said: “We’ve never missed a bond payment in the history of the city, and we’ll never miss a bond payment that we’re obligated to do.”