About

New York, December 18, 2024 -- Moody's Ratings (Moody's) has upgraded the City of
Minneapolis, MN's issuer rating and the rating on its outstanding General Obligation
Unlimited Tax (GOULT) bonds to Aaa from Aa1. The city had about $900 million in
debt outstanding at the close of fiscal 2023 (December 31 year-end). The outlook has
been revised to stable from positive.

The upgrade to Aaa from Aa1 reflects the continued strength in the city's economic
and demographic trends, a consistently strong financial profile and declining long-term
liabilities.

RATINGS RATIONALE

The Aaa issuer rating reflects the city's position at the center of a large and diverse
regional economy that benefits from consistently low unemployment, strong labor
force participation and a growing full value per capita that now exceeds $160,000. The
Minneapolis economy benefits from several large and stabilizing institutions and
favorable demographic trends with a stable to growing population that remains
relatively young compared to an aging state and nation.

The city has a strong financial profile with an available fund balance ratio that typically
hovers between 45% and 50%. Finances will remain strong despite growing public
safety costs given a stable revenue base, sound financial management including
multi-year budgeting and a track record of the willingness and ability to materially
increase the property tax levy. The long-term liabilities ratio has declined to levels well
below 200%, which is in line with Aaa rated peers, and the fixed costs ratio
consistently hovers around 10%. 

The Aaa rating on the GOULT bonds is at the same level as the Aaa issuer rating
because of the city's full faith and credit pledge and the authority to levy a dedicated
property tax unlimited as to rate and amount to pay the bonds.

RATING OUTLOOK

The stable outlook reflects the expectation that the strong regional economy will
continue supporting sound economic metrics and that the city's consistently strong
financial profile will allow it to absorb cost pressures related to employee
compensation and public safety staffing.

FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS
- Not applicable

FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS
- A weakening of demographic trends or prolonged declines in labor force participation
trends, resident incomes, or full value per capita
- A materially weakened financial profile with an available fund balance ratio
approaching 30%
- A long-term liabilities ratio increasing to levels well above 250%

LEGAL SECURITY
The GOULT bonds are backed by the city's full faith and credit pledge and authority to
levy a dedicated property tax unlimited as to rate and amount. The bonds are
additionally secured by statute.

PROFILE
The City of Minneapolis is located in Hennepin County (Aaa stable) in eastern
Minnesota (Aaa stable) and is directly west of St. Paul, with the Mississippi River
creating the border between the two cities. Minneapolis is the largest city in the state,
with a population that exceeds 420,000 residents. Governmental services primarily
consist of police, fire, health services, public works and general governmental
functions. The city's major enterprise funds include sanitary sewer, stormwater, water
treatment, municipal parking, solid waste and community planning.

The City of Minneapolis has committed nearly $17 million in direct investment, along with $1.5 million in 10-year federal tax credits, to 11 affordable rental housing projects in Minneapolis. The funds are awarded through a competitive request-for-proposal process each year. Both the Affordable Housing Trust Fund Program (AHTF) and the Federal Low Income Housing Tax Credit Program support new construction and the rehabilitation of affordable multifamily rental housing. The City Council approved the awards on Dec. 5.

"Minneapolis is leading the way in affordable housing, with the Affordable Housing Trust Fund playing a central role in our efforts," said Mayor Jacob Frey. "With the support of our amazing housing partners, we’re creating deeply affordable housing at a rate 8.5 times higher than previous years. Safe, affordable housing is a basic right for everyone in Minneapolis, and today’s investment is a reminder that we’re fully committed to making sure that right is a reality for all."

The AHTF was established in 2003 to assist in financing the production and stabilization of affordable and mixed-income rental housing projects with 10 or more units. Twenty percent of the total units need to be affordable and occupied by households at or below 50 percent of the area median income (AMI).

The City received 25 applications requesting $42,600,298 in funding from the AHTF. Proposals were evaluated based on underwriting standards, financial feasibility, location, project readiness, design guidelines and more. The funds are provided as a deferred loan with a 30- to 40-year term.

The recipients

The 11 projects awarded AHTF funds are as follows:

• Ward 1
  • Clare 5 Housing - 1900 Monroe St. NE - $1,205,000 for new construction of 33 units of 100% supportive housing for seniors living with HIV/AIDS.
  • 1345 Central - 1345 Central Ave. NE - $2,480,000 for the new construction of 64 units of affordable housing and first floor production space.
• Ward 3
  • Clare Apartments - 929 Central Ave. NE - $1,120,000 for rehabilitating 32 units of 100% supportive housing for people living with HIV/AIDS.
• Ward 4
  • Warren Apartments - 3120 Washburn Ave. N - $2,200,000 for new construction of 61 units with a significant number of deeply affordable housing units.
  • Upper Harbor Terminal - 3700 Washington Ave. N. - $1,295,000 for the new construction of 183 affordable units on a City-owned site.
• Ward 5
  • EPIC+R - 1014-1016 Plymouth Ave. – $1,500,000 for the new construction of 68 deeply affordable housing units with a significant number of family sized units on a City-owned site.
  • Downtown View - 1205 Chestnut Ave. - $1,465,000 for the rehabilitation of 39 units serving homeless youth.
• Ward 6
  • Native American Community Clinic-Housing - 1213 Franklin Ave. E. – $1,155,000 for the new construction of 83 deeply affordable units in a mixed-use project with an expanded clinic on-site.
• Ward 8
  • Zaria Apartments - 3030 Nicollet Ave. - $1,250,000 for new construction of 89 units with a significant number of deeply affordable housing units as well as a significant number of family sized units.
• Ward 9
  • Cheatham Apartments - 3716 Cheatham Ave. - $2,255,000 for new construction of 98 units of mixed income housing with a significant number of large family units.
• Ward 10
  • 2116 Nicollet - 2116 Nicollet Ave. S. – $1,070,000 for 53 units of 100% deeply affordable supportive housing for people at risk of homelessness.

The City Council also approved the project at 2116 Nicollet Ave. S. for a preliminary reservation of Federal Housing Tax Credits (HTCs) of $1.5 million for its housing additions. This HTC award will generate more than $12 million in equity to support the construction.

“The 2024 AHTF Program will help create or preserve 803 rental housing units across Minneapolis,” said Elfric Porte, director of housing policy and development for the City of Minneapolis. “Mayor Frey has championed producing and preserving affordable housing through the AHTF budget for over a decade. I’m grateful to him and the City Council for again stepping up with a significant $18 million investment in this work.”

S&P Global Ratings assigned its 'AAA' rating to the City of Minneapolis' $123.59 million series 2024 general obligation (GO) bonds, based on the application of its "Methodology for Rating U.S. Governments," published Sept. 9, 2024. At the same time, S&P Global Ratings affirmed its 'AAA' rating on the city's GO debt outstanding. The outlook is stable.

"The 'AAA' rating reflects Minneapolis' highly productive economy and robust tax base, the willingness and ability to increase property taxes to match expenditures, and a management team that consistently has built reserves to a high level by responding to unexpected budgetary changes and forward planning," said S&P Global Ratings credit analyst Jessica Olejak.

The stable outlook reflects the continued stronger revenue recovery, economic growth even with some risks around commercial real estate, and a five-year plan that shows a measured use of reserves and stimulus funds but a return to structurally balanced operations in the next two years with reserves remaining above the fund balance policy.

We could lower the rating if the city draws down its general fund reserves more rapidly than planned, which we believe could signify unanticipated budgetary pressure and would leave less room for fiscal maneuvering in outyear budgets.