Posted: 12/4/02

Bond sale will benefit from A1 bond rating

When the city of Forest Lake goes out for a $5 million general obligation tax increment bond issue on Dec. 16, it will have the benefit of an improved bond rating.

Moodyís Investors Service of New York City last week assigned the city of Forest Lake with an A1 bond rating. The new rating upgrades the cityís rating from Baa2 and is seen as good news, said City Administrator Chip Robinson this week.

Robinson, Mayor Ray Daninger and city fiscal consultants traveled to New York last month to make their case before Moodyís. The new rating comes just in time for the cityís planned issuance on Dec. 16 of $5 million in bonds to finance current and new downtown revitalization projects.

The bonds are backed by proceeds from current TIF districts and tax increments netted from new commercial development in the city.

In rendering its decision, Moodyís wrote: ìWhile Moodyís has a historic rating of Baa2 on the city, the recent consolidation between the city and the township of Forest Lake (historically rated A2) dramatically changed the credit factors of the city.

ìThus, the A1 rating is essentially an initial rating. Moodyís expects bond counsel to opine that the prior town and city debt will be secured by the new consolidated city entity; with that assumption, Moodyís has upgraded to A1 from Baa2 the outstanding city debt, and has assigned an A1 rating on the outstanding debt previously issued by the township.

ìThe A1 rating reflects the newly consolidated cityís satisfactory financial position, growing and diverse economic base, and manageable debt profile.î

In its decision, Moodyís also took stock of the cityís stable revenue streams and growing economic base. The report also noted the cityís general fund balance of $2.86 million or 46.2 percent of general fund revenues.

The report said Moodyís expects the cityís debt burden, now at 4.1 percent, to remain manageable given rapid principal amortization (80 percent in 10 years), expected continued tax base growth trends and limited future borrowing.

Following consolidation, the city has limited borrowing needs, absent development related infrastructure needs which are expected to be developer paid.

For purposes of statistical data, Forest Lake showed a 2000 year population of 14,400 and full value per capital income of $81,284. The countyís unemployment rate for September of 2002 was 3.3 percent.

As the city prepares to issue bonds on Dec. 16, Robinson said the net result of the Moodyís decision will be a lower net rate of interest for the bonds slated to be sold.

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