Standard & Poor's Corp. last week revised the outlook for Minneapolis's outstanding general obligation bonds to negative from stable, citing softness in the city's property tax base and decreased general funds.
However, the rating agency affirmed a AAA rating for a $32.1 million GO issue the city sold earlier this month and for $558.1 million of outstanding GO bonds. The agency also affirmed a AAA/A-1-plus rating on the city's $138.3 million variable-rate bonds.
"Basically, they've had some pressure on their finances, compounded with slow growth in their property tax base. Overall, that is contributing to greater pressure on their ability to hold down taxes," said Jay H. Abrams, director of surveillance at Standard & Poor's.
John Moir, director of the city's finance department, said several factors caused the financial pressures. For one, he said, the city recently lent money from its general fund to its water fund to cover water billing problems.
Mr. Moir also said the city's downtown vacancy rate, which exceeds the national average, contributed to softness in the property tax base. In addition, he noted that the city was anticipating some difficulties in receiving state contributions because of the recession.
Proceeds from the $32.1 million in GO bonds will finance "normal capital improvements," such as water and sewer projects and street repairs, according to Mr. Moir.
As for the future, he was optimistic the city would be able to improve its financial situation.
Moody's Investors Service rates the city's GO bonds Aaa.