Blaine, Minnesota - General Obligation Bonds
S&P Global Ratings raised Blaine's bond rating from AA+ to AAA for existing general obligation debt and long-term bonds related to capital improvements.
The AAA bond rating represents the highest possible rating assigned by any major credit rating agency. With the rating evaluation it demonstrates the high degree of creditworthiness for the City of Blaine based on several determining factors, outlined in the sections below. The city has demonstrated the ability to easily meet its financial commitments and debt obligations through superior financial forecasting/planning and execution of the policies and procedures established by the city's management team. The rating shows that the city is at a very low risk of defaulting on any debt issuance.
This upgrade reflects the city's healthy trend of economic growth, which is expected to continue for the foreseeable future. S&P evaluated the City of Blaine through various categories: economy, management, budgetary performance, budgetary flexibility, liquidity, and debt position. These areas of focus are explained in more detail below.
The overall determination of Blaine's economy is that it is very strong. The city, has a growing population of 66,000+ and is situated within Anoka County which is considered to be a broad and diverse area.
Blaine is ranked as the fastest-growing city in the Twin Cities' metropolitan statistical area (MSA).
Since 2010, the city has seen more than 3,500 housing units constructed with additional growth anticipated. Management expects the population to grow to nearly 85,000 by 2030.
Blaine has a projected per-capita effective buying income of 114 percent of the national level and per capita market value of $118,751. Overall market value grew by 9.7 percent over the past year to $7.6 billion in 2019.
The county unemployment rate was 2.5 percent as of 2018, compared to the state average of 2.9 percent.
Through S&P's Financial Management Assessment (FMA) methodology, it is determined that the city has strong and sustainable financial policies and practices embedded by management.
These policies focus on developing budgets utilizing at least five years of historical data, outside data sources, and other means of estimation. Additionally, management provides quarterly reporting to Blaine City Council on budget-to-actual figures. The city also maintains a five-year financial forecast and Capital Improvement Plan (CIP).
More recently adopted is a debt management policy that includes qualitative guidelines governing debt issuance.
Additionally, the general fund reserve policy calls for the city to maintain a reserve equal to 30 percent of prior-year budgeted expenditures and an additional $2 million reserve for emergencies.
The city's budgetary performance is considered very strong.
Blaine had an operating surplus of 9 percent or $2.6 million of expenditures in the general fund and 4.9 percent across all governmental funds. Some of these surplus funds are transferred to various capital projects and governmental funds for continued development and improvement.
Mid-way through 2019, management reports positive revenue variance as a result of ongoing building permit activity and salary and wage savings. It is expected that this trend will continue.
The city generates revenue through three primary sources:
- 65 percent from property taxes.
- 14 percent for charges for services.
- 14 percent from licenses and permits.
Blaine's budgetary flexibility is very strong with an available fund balance in fiscal year 2018 of:
- 45 percent of operating expenditures, or $13.6 million.
It is anticipated the fund balance will remain above at least 30 percent of expenditures for the current year and subsequent fiscal years.
Due to the city's policy regarding fund reserve, the 30 percent reserve threshold will remain with an additional $2 million available for contingencies. No changes are expected to be made to this policy regarding fund reserve.
With total available cash and cash equivalents at:
- 2.0x the total government expenditures.
- 20.2x governmental debt service.
The city's liquidity is considered to be in a very strong position.
In 2018, the city held $84 million in adjusted cash and conservative investments, primarily in U.S. agency securities, commercial paper and municipal bonds. It is expected that this will continue through the foreseeable future.
In addition, the city has access to other external liquidity sources, if necessary, as demonstrated by the issuance of general obligation debt over the past 20 years.
Overall, the city has an adequate debt position as of :
- Total government debt service is approximately 9.7 percent of total governmental fund expenditures.
- Net direct debt equal to 75.6 percent of total governmental fund revenue.
- Overall debt is approximately 2.4 percent of market value.
All of these statistics are considered positive credit factors for the city.
Additionally, due to the city's operational surpluses, it will continue to cash fund capital related projects, giving the city a lower reliance on the issuance of debt for capital development and improvement.