Minneapolis returns to the market with GO deal

Minneapolis will bring general obligation bonds to market next week in a deal that includes funding to repair damage left by the 2020 riots after a police officer killed George Floyd.

The city will sell $123.59 million of tax-exempt Series 2024 general obligation bonds via competitive sale Tuesday.

The municipal advisor on the deal is Ehlers and Associates. Bond counsel is Kennedy & Graven, Chartered of Minneapolis.

The deal carries AAA ratings from Fitch Ratings and S&P Global Ratings.

Minneapolis Chief Financial Officer Dushani Dye told The Bond Buyer that the city used a very small portion of American Rescue Plan funding to offset revenue loss during the pandemic.

“We used quite a bit of it for programming,” she said. “So we got money out the door. Many municipalities used ARPA funding to supplant lost revenue.”

Dye noted that recent years have consistently ended with a surplus.

“We’ve been actually contributing to the fund balance, and the planned use of the reserves had remained stable,” she said. “We don’t expect to have to draw down the reserve unexpectedly; it would be the planned uses of the reserve. And the planned uses generally are related to one-time spending, and we usually tie that back to whatever surplus that we have from the prior year.”

According to the preliminary official statement, the city’s sales tax revenue has recovered to 2019 levels. In 2024, the city saw a 15% increase above the previous year’s collections.

Some of the funds raised in the bond offering will go toward rebuilding the 3rd precinct of the Minneapolis Police Department, which was burned out during the riots sparked by George Floyd’s death at the hands of polce in 2020.

The city plans to build a new community safety center that includes a police precinct, nearby, while repairing and repurposing the former 3rd Precinct building.

Some of the other capital projects financed by the bonds are related to the city’s settlement agreement with the Minnesota Department of Human Rights, Dye said. The settlement included extensive changes to police policies and procedures, which were found to be racially discriminatory.

“We’re adding some work into the capital budget that is required by the settlement agreement with MDHR and potentially with the Justice Department settlement consent decree that might be coming in the future,” she said. “We have to make some improvements within the police precincts, so that… includes the rebuilding of the 3rd precinct plus doing upgrades to the other precincts to comply with our settlement agreement.”

The city’s general fund balance stood at $210.369 million at fiscal year’s end 2023, up from $173.717 million at the end of fiscal 2022.

Other projects financed with the bond proceeds include diseased tree removal; street lighting and street resurfacing and reconstruction; utility projects including sanitary sewer, storm sewer and municipal water system improvements; bridge repair; City Hall office renovations, park improvements; and traffic signal, signs and safety improvements.

Minneapolis officials said they don’t anticipate a change in the recent pattern of a fairly steady outstanding balance.

The city’s finance team does not plan to issue any more debt in the next six months.

The bonds are backed by Minneapolis’ full faith and credit, as well as unlimited ad valorem taxing power. The city is obligated to levy a tax unlimited by rate or amount on all taxable property within the city to pay debt service.