Allen E. Hoppe, CFA, CTP, Director - Banking, Investments and Debt
Minneapolis, MN
Minneapolis, MN
Learn about Minneapolis, MN including our News & Press Releases and Team.
Have questions? Reach out to us directly.
Learn about Minneapolis, MN including our News & Press Releases and Team.
The City of Minneapolis is located in Hennepin County. It is the largest city in Minnesota and serves as the center of finance, industry, trade, and transportation for the Upper Midwest region of the United States.
Minneapolis encompasses 57.4 square miles, including five square miles of inland water. The City rests along the banks of the nation’s largest river, the Mississippi. Minneapolis is known as “The City of Lakes,” featuring 22 lakes and 170 city parks. The Minneapolis Park System is one of the City’s most prized assets and considered one of the premier park systems in the United States. Properties of the Minneapolis Parks & Recreation Board total nearly 6,732 acres of land and water and include full-service neighborhood recreation centers.
As the major city within the larger metropolitan area, Minneapolis enjoys a strong and highly diverse business foundation of companies involved in manufacturing supercomputers, electronics, medical instruments, milling, machine manufacturing, food processing and graphic arts. In addition, with seven hospitals and the University of Minnesota, Minneapolis is a nationally known medical center that produces many high technology medical products.
Today Minneapolis Mayor Jacob Frey delivered his 2025 Budget Address in downtown Minneapolis in front of several Council Members, City leaders, and community partners. The mayor’s proposed budget addresses the increased cost of maintaining current City services while continuing to fund core programs, initiatives, and infrastructure important to Minneapolis residents.
In prepared remarks, Mayor Frey outlined his budget proposal which features investments for the City’s workforce, funding for the federal consent decree and state settlement agreement, and continued commitments towards the City’s nation-leading affordable housing work, sustainable climate action, downtown revitalization, and inclusive economic development.
The mayor’s proposed 2025 budget totals $1.88 billion with an 8.1% increase in the tax levy.
“What we are providing through this budget is a way through. We’re doubling down and investing in programs that work for the long haul, we’re ensuring our resources are used effectively, and we’re making sure our community will see the benefits,” said Mayor Frey.
“These investments are aligned with the values I’ve had since day one, and a difficult budgetary cycle doesn’t mute the core values guiding our shared work.,” Mayor Frey continued.
“Our planet demands work to reduce carbon output, and in Minneapolis we can take steps to deliver. People need the stability of a home, and in Minneapolis, we can continue leading the nation in providing affordable housing. Our streets need to be safe, and in Minneapolis, we can do both innovative and honest work to make that happen.”
Mayor Frey’s budget reflects a commitment to maximizing City resources. Inflation and significantly higher but necessary labor costs have increased the cost of delivering excellent City services. The spending down of American Rescue Plan Act (ARPA) funds and a reduced valuation of office buildings have shifted the impact of those costs to homeowners and renters through increased property taxes.
To address these realities without cutting essential city services, the City has:
Multiple other levies factor into the City's overall property tax levy, including independent boards like the Minneapolis Park and Recreation Board, the Municipal Building Commission, and the Minneapolis Public Housing Authority.
The City of Minneapolis' 'AAA' IDR and GO ratings reflect the city's 'aaa' financial resilience given a 'high midrange' level of budgetary flexibility and Fitch's expectations that general fund reserves will be maintained at or above 10% of spending and transfers out. The ratings also incorporate 'strong' demographic level metrics driven by high levels of educational attainment and a history of relatively low unemployment rates and a 'midrange' long-term liability composite. The ratings also reflect the application of a +1 notch additional analytical factor for economic and institutional strength due to the city's role as a vital component of the Minneapolis-St. Paul-Bloomington metropolitan statistical area (MSA), which contributes 1.4% to U.S. GDP.
--Sustained declines in financial resilience leading to general fund reserves falling to below 10% of spending and transfers out;
--Marked deterioration of demographic and economic metrics;
--Material increase in long-term liabilities assuming current levels of personal income, governmental revenues and spending.
--Not applicable given the 'AAA' ratings.
The bonds are general obligations of the city, backed by the city's full faith and credit and unlimited ad valorem taxing power. To pay debt service, the city is obligated to levy a tax without limit as to rate or amount on all taxable property within the city.
The Local Government Rating Model generates Model Implied Ratings which communicate the issuer's credit quality relative to Fitch's local government rating portfolio (the Model Implied Rating will be the IDR except in certain circumstances explained in the applicable criteria). The Model Implied Rating is expressed via a numerical value calibrated to Fitch's long-term rating scale that ranges from 10.0 or higher ('AAA'), 9.0 ('AA+'), 8.0 ('AA'), and so forth down to 1.0 ('BBB-' and below).
Model Implied Ratings reflect the combination of issuer-specific metrics and assessments to generate a Metric Profile, and a structured framework to account for Additional Analytical Factors not captured in the Metric Profile that can either mitigate or exacerbate credit risks. Additional Analytical Factors are reflected in notching from the Metric Profile and are capped at +/-3 notches.
Minneapolis Model Implied Rating: 'AAA' (Numerical Value: 11.27)
-- Metric Profile: 'AAA' (Numerical Value: 10.27)
-- Net Additional Analytical Factor Notching: +1.0
Individual Additional Analytical Notching Factors:
-- Economic and Institutional Strength: +1.0
Minneapolis' Model Implied Rating is 'AAA'. The associated numerical value of 11.27 is at the upper end of the range for its current 'AAA' rating.
Minneapolis' financial resilience is driven by the combination of its 'High' revenue control assessment and 'Midrange' expenditure control assessment, culminating in a 'High Midrange' budgetary flexibility assessment.
-- Revenue control assessment: High
-- Expenditure control assessment: Midrange
-- Budgetary flexibility assessment: High Midrange
-- Minimum fund balance for current financial resilience assessment: >=10.0%
-- Current year fund balance to expenditure ratio: 30.9% (2022)
-- Five-year low fund balance to expenditure ratio: 20.7% (2022)
Revenue Volatility - 'Strongest'
Minneapolis' weakest historic three-year revenue performance is neutral to the Model Implied Rating.
The revenue volatility metric is an estimate of potential revenue volatility based on the issuer's historical experience relative to the median for the Fitch-rated local government portfolio. The metric helps to differentiate issuers by the scale of revenue loss that would have to be addressed through revenue raising, cost controls or utilization of reserves through economic cycles.
-- Lowest three-year revenue performance (based on revenues dating back to 2005): 3.0% increase for the three-year period ending fiscal 2015
-- Median issuer decline: -4.7% (2022)
Population Trend - 'Midrange'
Based on the median of 10-year annual percentage change in population, Minneapolis' population trend is assessed as 'Midrange'.
Population trend: 1.0% Analyst Input (53rd percentile) (vs. 1.0% 2021 median of 10-year annual percentage change in population)
Unemployment, Educational Attainment and MHI Level - 'Strong'
The overall strength of Minneapolis' demographic and economic level indicators (unemployment rate, educational attainment, median household income [MHI]) in 2022 are assessed as 'Strong' on a composite basis, performing at the 74th percentile of Fitch's local government rating portfolio. This is due to very high education attainment levels and very low unemployment rate offsetting midrange median-issuer indexed adjusted MHI.
-- Unemployment rate as a percentage of national rate: 75.0% Analyst Input (83rd percentile) (vs. 69.4% 2022), relative to the national rate of 3.6%
-- Percent of population with a bachelor's degree or higher: 53.5% Analyst Input (91st percentile) (vs. 52.6% 2021 Actual)
-- MHI as a percent of the portfolio median: 97.9% Analyst Input (47th percentile) (vs. 98.1% 2021 Actual)
Economic Concentration and Population Size - 'Strongest'
Minneapolis' population in 2021 was of sufficient size and the economy was sufficiently diversified to qualify for Fitch's highest overall size/diversification category.
The composite metric acts asymmetrically, with most issuers (above the 15th percentile for each metric) sufficiently diversified to minimize risks associated with small population and economic concentration. Downward effects of the metric on the Metric Profile are most pronounced for the least economically diverse issuers (in the 5th percentile for the metric or lower). The economic concentration percentage shown below is defined as the sum of the absolute deviation of the percentage of personal income by major economic sectors relative to the U.S. distribution.
-- Population size: 422,003 Analyst Input (above the 15th percentile) (vs. 427,806 2021 Actual)
-- Economic concentration: 32.2% Analyst Input (above the 15th percentile) (vs. 32.8% 2022 Actual)
Demographic and Economic Strength Additional Analytical Factors and Notching: +1.0 notch (for Economic and Institutional Strength)
Minneapolis is a vital component of the Minneapolis-St. Paul-Bloomington MSA, the 15th largest MSA in the country in terms of GDP contribution at 1.4% of U.S. GDP as of 2022. The city is home to several large corporation headquarters and is an important contributor to the MSA which had job levels of approximately 2 million in May 2024, according to the Bureau of Labor Statistics.
The most recently available data was used for demographic and economic metrics.
Long-Term Liability Burden - 'Midrange'
Minneapolis' liabilities to governmental revenue remain strong while carrying costs to governmental expenditures and liabilities to personal income remain midrange. The long-term liability composite metric in 2022 is at the 58th percentile, roughly in line with Fitch's local government rating portfolio.
-- Liabilities to personal income: 4.5% Analyst Input (58th percentile) (vs. 4.9% 2022 Actual)
-- Liabilities to governmental revenue: 155.8% Analyst Input (61st percentile) (vs. 168.4% 2022 Actual)
-- Carrying costs to governmental expenditures: 14.0% (2022) (56th percentile)
Direct debt was adjusted with debt issued and amortized since the most recently available audit (2022).
Analyst inputs reflect new debt issued and debt amortized in fiscal 2023.
Minneapolis is the largest city in the state of Minnesota. Population growth has been strong as educated, younger workers have been attracted to the diverse employment opportunities in the city, as well as to the city's amenities and cultural attractions and easy commutability. Along with its sister city of St. Paul, Minneapolis forms the core for the second-largest economic center in the U.S. Midwest, after Chicago.
The city's broad and diverse economic base benefits from major employers in the stable health care, higher education and state and county government sectors. Minneapolis's economy is very diverse. Major employers include entities in health care, banking, higher education and the retail trade. The city also includes a significant public-sector sector given the proximity of the state government.
The five largest employers in the city are the University of Minnesota (17,691), Allina Health (10,856), Target Corporation (8,500), the Hennepin Health Care (7,111) and Wells Fargo Bank (7,000).
On Friday, Mayor Frey and Council Member Katie Cashman were joined by City leadership to celebrate the City’s 100th electric vehicle going into service. The Minneapolis Public Works Department is driving an ambitious Green Fleets policy geared toward creating a zero-emission fleet. This initiative is just one part of the Climate Equity Plan, which is the City’s plan to reach its accelerated, equitable, and aggressive climate goals over the next ten years.
“Climate change is an undeniable fact, and it’s on us to urgently address it,” said Mayor Jacob Frey. “Today’s launch of our fleet’s 100th electric vehicle marks a significant milestone on our path to becoming a carbon-neutral city. This initiative—along with our other Climate Legacy Initiative projects—is an investment in our environment, an investment in the health of our residents, an investment in sustainability, and, most importantly, it’s an investment in the future of Minneapolis. We are not just talking about change; we are making it happen.”
"Minneapolis is nationally recognized for its natural amenities. We’ve made it our mission to protect that reputation and take climate action through our city’s operations," said Margaret Anderson Kelliher, City Operations Officer. "I’m so proud to mark this milestone for our staff and for the residents they serve. By continuing to electrify our fleet, we’re investing in a more durable, sustainable future not just for our planet but our workforce.”
The City’s commitment to converting its fleet to all electric vehicles will continue to ramp up in the second half of 2024. While 100 electric vehicles are now operating on city streets, 41 additional vehicles have been delivered and are being outfitted for service with 11 more on order. In addition, 49 fleet charging stations have been installed across city operations with another 43 scheduled to be installed this year.
The City’s new Climate Equity Plan, provides a roadmap for climate work over the next decade, including initiatives like the City’s all-electric fleet. The Plan is funding by the mayor’s Climate Legacy Initiative. Beginning with Mayor Frey’s 2024 budget, $10 million will be invested each year to the CLI, which triples previous climate work investments. The community-wide plan sets a goal to significantly reduce climate pollution by 2030 and become carbon neutral by 2050. It also envisions action to weatherize all homes, reduce utility bills, promote green job training, and plant more trees.
“As a Council Member, I hear about the need for strong climate action and investments in our resilience and our future. But I also hear from constituents about day-to-day noise pollution, whether it’s from speeding cars on the parkways around the lakes, honking traffic on i-94 or even their neighbors’ leaf blowers in the fall,” said Minneapolis Council Member Katie Cashman, who represents ward seven and is chair of the Climate & Infrastructure committee. “Electrifying our city vehicles is not just about air pollution reduction, it’s also about noise pollution reduction and making our city more pleasant and livable."
Air pollution is linked to increased rates of cancer, heart and lung disease, asthma and allergies. Carbon dioxide pollution, a greenhouse gas, causes climate change. Cars and trucks are the largest contributor of air pollution within Minneapolis and are a significant source of greenhouse gases.
“Today, we are a part of one of the many incredible stories going on across this city,” said Patrick Hanlon, Minneapolis Health Department Deputy Commissioner of Sustainability, Healthy Homes and Environment. “We started with a few projects scattered across the city, and we are now investing in hundreds of clean energy projects each year that are saving people money and improving our environmental quality. As environmental and public health professionals, it feels good to work in a city that reinvests in its community in this space.”
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