Money Talks: St. Louis Park Among 19 State Cities to Snare Highest Credit Rating

When it comes to money management, St. Louis Park ranks high, according to a rating system by one of the nations leading credit rating agencies.

The Standard & Poor’s Rating Services assigned its AAA rating to the City of St. Louis Park's series 2016A general obligation (GO) bonds. At the same time, Standard & Poor’s affirmed that rating on the city’s existing GO debt, with a stable outlook for both ratings.

Triple A is the highest credit rating issued by Standard & Poor’s, indicating the city’s capacity to meet its financial commitment is extremely strong. St. Louis Park is one of only 19 cities in Minnesota to which Standard & Poor’s assigned the top rating, officials said.

According to the report:

“The stable outlook reflects our view that St. Louis Park will maintain its strong budgetary performance and very strong budgetary flexibility, supported by very strong management conditions … The city’s very strong economy, including its access to and participation in the Twin Cities metropolitan area, adds stability to the rating in part by moderating the impact of local economic fluctuations.”

The $10 million in series 2016A GO bonds is being used to finance improvements for the city’s indoor and outdoor recreation center projects.

What’s a credit rating?

A city’s credit rating is similar to a person’s credit score. A high rating, like the City of St. Louis Park’s, makes issuing bonds and borrowing money less expensive. It also helps attract public and private investment because it assures potential investors the city can pay its bills and continuing providing vital city services at a high level.

What’s a municipal bond?

Cities issue general obligation (GO) bonds to finance infrastructure needs, i.e., it’s a debt financing mechanism to provide capital for projects. Another way of explaining it is a community identifies a need and decides to issue a bond to investors to receive cash payments, with the promise to repay the bond holder over time.

The proceeds, or cash payments, from a bond sale are then used to pay for the designated purpose of those funds. While there are other methods to issue debt, this is the most commonly used method among cities.

The above information was provided by the city of St. Louis Park.