The city of Minneapolis was hit with some bad financial news Monday when Moody's Investors Service downgraded the city's credit rating on its outstanding general obligation bonds, from AAA to Aa1, the Star Tribune reports.
The downgrade was due largely to the city's $679 million of outstanding general obligation debt, the newspaper noted.
Moody's cites other challenges for the city: declining property values, high pension liabilities, sizable fixed costs, dependence on state revenue and above average debt levels.
The move was a bit of blow to Mayor R.T. Rybak, who has taken some credit for helping to turn around the city's finances over the years, the Star Tribune reported. It was just three years ago that the city got its AAA rating back with Moody's, after it had been stuck with a Aa1 rating since 2001, the newspaper notes. Rybak announced in December that he would not seek a fourth term as mayor.
Moody's also cited some Minneapolis strengths:
-- Role as a Midwestern economic center with a sizable tax base that benefits from diverse employment opportunities and institutional stability in government, education, and health care
-- Well-managed financial operations, including comprehensive multi-year planning and institutionalized reporting mechanisms
-- Demonstrated willingness to increase property taxes and implement budgetary adjustments in order to maintain or replenish reserves despite revenue and expenditure pressures
-- Relatively conservative debt portfolio with modest variable rate debt and no exposure to derivatives
Moody's report offered some good news for the state's finances and upgraded Minnesota's financial outlook from "negative" to "stable."
Minnesota's bond rating of Aa1 remains the same.