Minneapolis will go to market with its first open auction on Wednesday, one week after Mayor Jacob Frey released a $2 billion 2026 budget proposal calling for a 7.8% property tax increase.
The auction will take place from 9:30 to 9:45 a.m. on Wednesday via Grant Street Group's MuniAuction website, for $140.46 million of tax-exempt Series 2025 general obligation bonds.
Minneapolis typically sells GOs competitively, but in this auction, underwriters will be able to see where they've been ranked among all the bids, and to improve their bid accordingly. Proposals must specify rates in integral multiples of 5/100 or 1/8 of 1%. Rates must be no greater than 5.00%.
The bonds, which received across-the-board triple-A ratings from Fitch Ratings, Moody's Ratings and S&P Global Ratings, will be delivered on or about Sept. 10.
"It's a little bit more competitive than what we've done in the past," CFO Dushani Dye told The Bond Buyer. "We're hoping to see a lower interest rate. We'll see how this works out for us, but that's our goal."
The municipal advisor on the deal is Ehlers and Associates. The bond counsel is Kutak Rock.
The bonds will mature on Dec. 1, 2025 through Dec. 1, 2044, according to the
The deal is composed of $77 million of levy-funded debt, various purpose bonds that will fund the construction of capital projects in the city; $55 million of enterprise debt, utility revenue bonds that will fund improvements to the municipal water system, storm sewer system and sanitary sewer system; and $7 million of assessment debt, which will fund various assessable public projects in the city.
For all bonds except the utility revenue bonds, an initial levy of general ad valorem taxes will be made and filed with the county for each year, in amounts that, together with other revenues, will equal 105% of the principal and interest payments on the bonds each year.
"We have over 100 individual projects that are being financed" with these bonds, said Allen Hoppe, director of banking, investments and debt for Minneapolis.
Hoppe said this open auction was a long time in the making.
"We've been approached by our financial advisor a couple times, and we said we'd think about it a little bit," he said. "With the passing of time and giving it some more thought, and just the reinforcement of our credit quality, we said, 'Yeah, this is something that we should have expectations of a comparable or better result when it comes to the true interest rate.'
"(Given) the fact that we're triple-A, we're always well-received in the marketplace, but this is an opportunity for the underwriters to see where the results are at and what they're up against instead of just doing a blind competitive (sale)," he added.
The preliminary official statement notes that the city has so far gotten all planned federal funding despite the threats of lost revenue. And federal funds accounted for only 3% ($60 million) of budgeted revenue in 2024.
However, Dye said the potential future loss of federal funding is their biggest concern right now.
"One thing we've been stressing in the finance department is to keep a healthy reserve for lots of unknowns that are still outstanding for federal funding," she said. "We have the risk of losing $60 million in federal funding over the next few years. So we're hoping to build up our fund balance over the next few years as a safety net for the city. We do have to scale back some of our federally funded programs."
Frey's budget would keep many of the city's vacant positions vacant to allow for some flexibility heading into the next budget cycle, Dye noted.
Fitch praised the city's high level of financial resilience, saying it expects general fund reserves will be kept at or above 10% of spending. It also noted robust demographic metrics, with low unemployment and high educational attainment, as well as the economic and institutional strength stemming from the city's pivotal role in the broader metropolitan area.
Moody's pointed to the role of large and stabilizing institutions such as the University of Minnesota. It said that while the city has to contend with higher labor costs, due to higher than usual salary hikes in the current police contract, property tax and intergovernmental revenues are both increasing. And the city's long-term liabilities ratio has decreased to a favorable level.
The rating agencies also praised the management team's sophistication.
"The city has been very consistent over the years," Hoppe said. "The other thing that I think is in our favor is being responsive. So when times are good, it's easier to do more capital projects… But if things are the way they are these days, with federal cutbacks or anything else, management's responsive to making some changes."
