CHICAGO - The triple-A Minneapolis-St. Paul Metropolitan Council is readying $194 million of general obligation notes and bonds for competitive sale Tuesday.
The council will follow up Tuesday's sale to fund wastewater, parks, and transit projects, including construction of the nearly finished Central Corridor light rail line, with a $9 million refunding next month of outstanding lease revenue certificates of participation for savings. Springsted Inc. is financial adviser and Kennedy & Graven bond counsel on the issues.
The sale Tuesday offers four series including an A series for $101 million of GO grant anticipation notes, a B series for $8 million of GO park notes, a C series for $25 million of GO transit notes, and a D series for $60 million of GO-backed wastewater revenue bonds. All carry top credit marks from Moody's Investors Service and Standard & Poor's.
Proceeds of the new money will cover the council's borrowing needs for the next year and the grant anticipation notes will finance the ongoing construction of the Central Corridor project, known as the Green Line, ahead of the council's receipt of Federal Transit Administration grant funds.
"This is our third issue for cash flow as the timing of when the federal government reimburses us doesn't align with our cash flow needs," said the council's chief financial officer, Mary Bogie.
The council expects to receive its full funding award from the federal government although the timing is slowed due to sequestration, Bogie said.
The federal government is covering half of the $950 million price tag with state and local funding sources picking up the rest. They include contributions from the Counties Transit Improvement Board, state aid, funds from Ramsey County's rail board, and from Hennepin County's rail authority.
A quarter-cent sales tax and a motor vehicle sales tax in five counties generate funds to help cover the local share. The 11-mile route connects downtown Minneapolis and downtown St. Paul by way of the University of Minnesota and University Avenue. It's expected to begin service this summer.
The council has been further impacted by federal sequestration spending cuts with reduced subsidies on its Build America Bonds. "We levy for 105% of our debt service so we been able to handle" the cuts, Bogie said.
The council was established in 1967 to manage transportation, environmental services, and long-range planning for the seven-county region that covers 188 towns and cities with a population of 2.8 million.
The council's next big project is a further expansion of its light rail system. The $1.25 billion Southwest Corridor extension of the Green Line from Minneapolis to Eden Prairie is in the early stages with preliminary engineering now underway and the council is the process of applying for federal aid.
Moody's said the council's Aaa GO rating reflects the strong regional economy that lends diversity and institutional stability to the tax base, expected recovery after a few years of declining property values, well-managed general fund operations, and sound transit operations despite volatility in some revenue sources and planned use of reserves in fiscal years 2013 and 2014. The system benefits from a $543 million unrestricted cash balance.
Credit challenges include five consecutive years of valuation declines, volatility of motor vehicle sales and state general fund support, and historically lower sewer service reserves.
"The stable outlook reflects our expectation that financial operations will continue to remain strong despite planned draw downs," Moody's said. "It also reflects the council's established role as the primary source of public transit and sewer treatment services within the Twin Cities region."
