Put the brakes on

Watch a representative from Ehlers, the city’s contracted financial advising firm, who gets paid to help cities borrow money, defend Minnetrista’s weak debt profile from Standard & Poors in this video from Monday night’s council meeting, rationalizing that because everyone else does it, it really isn’t a big deal. Well, of course a firm specializing in debt issuance would see it that way.

S&P Debt RatingMinnetrista’s debt service is 18.6% of total government fund expenditures and that is high, according to Standard & Poors which isn’t a firm specializing in debt issuance. They specialize in evaluating the credit worthiness of organizations. Perhaps we should heed the assessment from S&P rather than go along with the don’t worry be happy advice from our debt issuance firm.

debt growthBecause a city can just take the money out of constituents’ pockets it carries an obligation to make sure it manages debt responsibly. Even the Ehlers rep estimated Minnetrista would need to almost cut its debt service in half (reduce it to 10%) to change the S&P rating. Minnetrista needs to put the brakes on. Apparently so do a lot of other Minnesota cities.

Monday night’s discussion centered around refinancing some G.O. bonds and the city’s ratings relative to receiving favorable bids. Having a AA++ rating is a good thing and the city’s finances are strong partly because our residents are relatively affluent which translates into what they call a “high tax capacity” (there is plenty more to take) and there are funds stashed away in “special” funds that aren’t being used. But bond ratings are not the point here. Saddling future generations with debt that keeps growing is the point.

The eight page Standard & Poors rating wasn’t in our council packet or available to the public prior to the meeting.  I had to request a copy of the rating assessment to review prior to the meeting and asked that it be provided to the council. They had planned to hand it out during the council meeting. If residents would like a copy they can call city hall.

 

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