Minneapolis has earned, by all external measures, the right to a little complacency.

The city has been rated triple-A by both Standard & Poor's Corp. and Moody's Investors Service since the 1960s. Officials say that the downtown's emerging entertainment sector generates taxable sales estimated at $325 million a year. Office space is starting to sell at a premium again as other cities lose revenue to suburban office parks, and downtown retail sales are fifth in the nation.

But the city fathers and mothers -- Minneapolis recently elected its first woman mayor and a woman city council president -- remain vigilant. "I try to stay nervous," admits Minneapolis finance director John Moir.

"We still sweep [retail boulevard] Nicollet Mall twice a day," laughs John Labosky, president and chief executive officer of the Minneapolis Downtown Council. "It's that Scandinavian cleanliness."

A tidy picture indeed emerges every time the rating agencies look at the city. Minneapolis is one of only a handful of major cities to earn a triple-A rating, and analysts heap it with fiscal praise.

"It's been consistently above average as far as unemployment, income growth, building activity, and the depth and diversity of the tax base," said Michael Forrester, a director a Standard & Poor's.

"The city has proven financial management and controls in place, and there's been a continued willingness and ability to maintain a healthy general fund balance in excess of the city's mandated 10% minimum," said Steven Bocamazo, vice president at Moody's.

As of last May, Minneapolis had $748 million in outstanding general obligation debt. The city's unemployment rate remains below the national average, and fell from 4.8% in 1992 to 3.5% in 1994.

But the rosy figures belie a difficult couple of years for the city that bills itself as the commercial center of the upper Midwest. Between 1980 and 1990, the tax base shifted significantly toward commercial office space, according to Labosky. At the start of the decade, downtown office buildings accounted for 20% of the tax base; by 1990, they accounted for more than 40%.

The increasing reliance on office development proved a problem when the market became ovesaturated. According to Minneapolis-based Towle Real Estate Co., the downtown office vacancy rate in the city jumped from 11% in 1990 to 23% in 1992.

"They experienced some difficulty with an oversupply of office space," said Bocamazo. "That resulted in a sizable reduction in the city's taxable values."

However, unlike nearby St. Paul, which nearly defaulted on bonds issued to fund a port authority because of declining real estate values, Minneapolis stayed on course.

"What really helped us maintain our credit rating throughout the downturn in the commercial tax base was, first, that it was not caused by a decline in demand, but by an oversupply. The diverse economy of Minneapolis was never in question," said Moir. "Second, the city council was able to adjust the budget for expenses and revenue and not dip into our 10% reserve. That showed we had the political will and the ability to balance the budget."

Throughout the two-year slump, property tax increases remained below 3% a year. Jackie Cherryhomes, president of the city council, said officials were able to hold the line because "we have a strong and healthy downtown. What happened to us was nothing compared to what happened to other cities around the country. And we had a strategy and a plan for downtown."

That plan involved stepping up the entertainment sector and the retail economy in Minneapolis. The city now boasts three million square feet of retail selling space, beefed up with the arrival of Saks Fifth Avenue in 1990, Neiman Marcus in 1991, and Montgomery Ward in 1993. Despite competition from the gigantic Mall of America in nearby Bloomington, Minn., the city continues to attract plenty of retail shoppers, said Labosky.

Complementing the retail spine along Nicollet Mall is what Labosky calls a "golden triangle of public assembly buildings." The city's Metrodome sports arena was built in 1982. The Target Center basketball arena went up in October of 1990, and the downtown convention center was completed two months later.

Labosky said each of the three buildings feeds revenue to the others. For instance, he said, while the Dallas Cowboys and the Buffalo Bills were playing the Superbowl in the Metrodome two years ago, vendors were selling sports paraphernalia and holding bowl events in the other two buildings.

"It was that critical mass of three buildings coming together so near to each other. Now there are more than two million people downtown every day, parking and paying and going to restaurants," said Labosky.

He and others admit, however, that the development carried a price. The city's debt burden skyrocketed. The Metrodome cost only $55 million. But the convention center cost about $200 million to build. It was paid for with the revenue from bonds supported by a half-cent citywide sales tax. That primary revenue source was backed up by a 3% food and beverage tax, a 3% entertainment tax, and a 2% hotel tax.

"The half-cent sales tax generated more than enough to pay the bonds, and now there's a positive fund balance," Labosky said.

Nevertheless, the debt levels sent up red flags to the rating agencies. "Debt ratios have risen considerably in recent years as taxable values have fallen while the city incurred a significant quantity of debt -- primarily on behalf of its downtown redevelopment efforts," according to Moody's last report on the city in May 1994. "In the near term, those ratios are likely to rise still further as the independent school district readies a [$130 million] capital improvement program."

Contributing to the debt ratio is an $86 million deal set for mid-December to buy the privately owned Target Center. As it stands now, the city and two quasi-governmental agencies would each issue a separate series of bonds to enable the Minneapolis Sports Facilities Commission to buy the center. The city would issue $19 million of general obligation debt to refinance outstanding tax increment bonds issued when the center was first built.

But analysts at both Moody's and Standard & Poor's say their concerns about the rising debt rate are alleviated by the city's stable fiscal history. And they note that most of its annual debt service requirements are supported by tax increments, sales taxes, and utility net revenues -- not property taxes.

Minneapolis officials are not apologizing for their aggressive development and the related bonding. "Probably the key to our revitalization was the establishment of the convention center," said Cherryhomes. "It really moved Minneapolis into being a convention center city. We had monkeyed around with it in the past, but this time we made the commitment and it substantially changed our economy."

Some members of the city council want to formalize city planning even further, by folding the quasi-independent Minneapolis Community Development Agency into the city government. Cherryhomes said she will fight that plan.

"If you did that, you would have to fold all the bond issues into one entity. The development agency's rating is not as good as the city rating, and we'd have less flexibility and opportunity to do the kinds of things we've done in the past," she said.

What kinds of opportunities are on-the agenda in Minneapolis? The Metropolitan Airports Commission has approved a $135 million face-lift for Minneapolis-St. Paul International Airport. Business leaders say developers are circulating five different proposals to erect new office buildings downtown. And some say the next big project will be a "sin-o-tropolis" center devoted to technological fun for adults: virtual reality games, rides, and special 3-D movie theaters.

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