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Here's why Minnesota's construction projects will soon cost you less

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Minnesota's bond rating got an upgrade Thursday, which means taxpayer costs for state building projects are headed downward.

Fitch Ratings, one of the country's three main credit rating agencies, bumped Minnesota up to the highest score it has, AAA.

What does that mean?

Well, a higher bond rating means lower interest rates when the state borrows money to do things like fix up old buildings on university campuses, maintain labs used by the Health or Agriculture Departments, or upgrade security at state hospitals.

The state pays for those sorts of projects by selling bonds to investors. When a bond has a triple A rating, that means whoever's selling it is considered a sure bet to pay it back. And since it's such a safe bet, the payoff to the investor is smaller.

And, of course, smaller payments to investors mean less taxpayer money coming out of the state's bank account.

We're about to sell a bunch of bonds

Fitch is only one of the three big ratings agencies and as MPR News reports, the others (Standard & Poor's and Moody's) still have Minnesota one notch below their top score.

But Fitch moving Minnesota up to AAA is likely to pay dividends as soon as next week, when the state is set to sell nearly $800 million in bonds, Minnesota Management and Budget says.

The Legislature was expected to approve a new batch of construction projects this spring but didn't get it done. Now party leaders and Gov. Dayton are talking about a possible special session in August to approve a bonding bill (along with a tax cut measure).

Why'd we get bumped up to AAA?

In its announcement, Fitch mentioned Minnesota's "solid and broad-based economy."

We also carry a lighter debt burden than most other states. 24/7 Wall Street noted last December that Minnesota's debt was less than 30 percent of its annual revenue. The average among the states was 51 percent, they said.

Fitch is also very fond of Minnesota's reserve fund. Stocking away money when times are good puts the state in a good position to get through a downturn without having to take drastic measures, they say.

They also note that under state law whenever there's a budget surplus, some of it automatically goes into the reserve fund until it reaches $2 billion (it's at $1.6 billion now).

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