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Lake Elmo gets a bonding upgrade
Lake Elmo’s bond rating was raised to AA+ from AA earlier this month, allowing the city to borrow money for projects at a lower interest rate.
Standard & Poor’s Financial Services, a municipal credit rating agency, raised Lake Elmo’s long-term rating based on the application of its local government rating criteria. S&P’s AA+ rating is just one tick below AAA, the highest rating it gives.
City administrator Dean Zuleger said the AA+ rating is the highest bond rating the city has been awarded by S&P.
“For our part [the upgrade] shows that the work the finance committee has done over the last 18 months has been met with favor from the borrowing community,” Zuleger said. “We are pleased to see we’re going in the right direction financially.”
Council member Wally Nelson, who chairs the city’s finance committee, said the bonding upgrade could save the city hundreds of thousands of dollars in interest payments. He said Lake Elmo has “the ship running in the right direction, so to speak.”
“It validates what the finance committee and city has done as a whole,” he said. “It’s really about the financial policies and procedures we put in place over the last 18 months. In a growing city, we’re keeping our rates stable, which is a great thing.”
According to an S&P Ratings Report Summary, the city’s long-term rating of AA+ reflects the agency’s assessment of the following factors:
• The city has a strong local economy with per capita buying income at 163 percent of the national average and a 4.6 percent unemployment rate.
• Lake Elmo has 88 percent of its approximately $3.1 million annual operating budget in reserves.
• Lake Elmo’s debt liability profile is adequate and management plans to retire 66 percent of its $14,000,000 of direct debt within 10 years.
• The city has strong liquidity and fiscal management is viewed as “strong” with the establishment of disciplined financial policies over the past two years.
• The city has ended the past two year’s with a budget surplus above the national average.
Zuleger said $200,000 of the city’s two-year, $400,000 budget surplus would be used for tax rate stabilization -- to keep taxes flat -- while the remainder would be used to pay back an internal loan.
Moody’s Investors Service also issued its bond rating for the city this month. Lake Elmo was assigned an Aa2 rating, which is rated as high quality and a very low credit risk.
According to Moody’s report, the Aa2 rating reflects Lake Elmo’s “moderately-sized but affluent tax base,” strong financial operations, conservative budgeting and ample reserves. Nelson said while S&P upgraded the city’s long-term bond rating, Moody’s kept its the same.
“Both are great for the city,” he concluded.
Joshua Nielsen can be reached at firstname.lastname@example.org or 651-748-7822.