Moody's Investors Service has downgraded the city of Minneapolis bond rating to Aa1 from Aaa, which applies to the city's approximately $679 million of outstanding debt.
In simple terms, the bond rating is much like your own credit rating, which means it will likely cost Minneapolis millions of dollars more in interest to borrow money for future projects.
WHAT FACTORED INTO THE AA1 RATING?
The Minneapolis bond rating and "stable" outlook are a product of the following:
- Minneapolis' role as a regional economic center
- Consecutive years of property value declines
- Well-managed civic finances
- Adequate financial reserves
- Moderate but above average debt burden
- Net pension liabilities
NOT QUITE DETROIT
Minneapolis could not be more unlike Detroit – a bankrupt, Rust Belt city that has yet to recover from the recession. Unemployment in Detroit is a staggering 16 percent in contrast to just 4.7 percent unemployment in Minneapolis.
In fact, prior to Tuesday's downgrade, Minneapolis was one of only six cities with a top Aaa rating.
Earlier this month, Moody's dropped Chicago's rating three notches to A3, largely based on a $3.6 billion pension debt. Financial analyst Mike Rodgers says Minneapolis is on much more stable ground.
"Economically we are in better shape because of the diversification of the manufacturing and the services and the med-tech business," Rodgers said.