AAA Bond Ratings Keep Interest Rates Low, Saving the State Money

On Aug. 1, 2023, Minnesota Management and Budget (MMB) sold $1.02 billion in state general obligation bonds. Money generated from the sale will support programs and capital improvements as well as refinance existing debt for economic savings.

“The sale enables us to invest in needed infrastructure and save some $33 million by refinancing $622 million in existing debt to lower-interest financing,” said MMB Deputy Commissioner Erin Campbell. “All three major bond rating agencies recently reaffirmed Minnesota’s AAA status, enabling us to sell the bonds at low interest rates.”

Specifics Regarding the Sale

The five series of general obligation bonds sold include:

· $264,000,000 General Obligation State Trunk Highway Bonds, Series 2023B (3.4% interest)

· $160,725,000 General Obligation State Various Purpose Bonds, Series 2023A (3.4% interest)

· $329,145,000 General Obligation State Various Purpose Refunding Bonds, Series 2023D (2.8% interest)

· $255,320,000 General Obligation State Trunk Highway Refunding Bonds, Series 2023E (2.8% interest)

· $14,865,000 General Obligation Taxable State Various Purpose Bond Series 2023C (4.6% interest)

Kutak Rock LLP served as bond counsel on the transaction.

What the Rating Agencies Said

Last month, Moody’s, Fitch and S&P Global reaffirmed the across-the-board AAA bond ratings achieved in 2022, marking the second time since 2003 that all three rating agencies gave Minnesota the very top bond rating.

In affirming Minnesota’s AAA rating, Fitch stated, “Minnesota's 'AAA' IDR and GO bond ratings reflect the state's steadily-growing and broad-based economy, highly educated workforce, expanding population, and a revenue structure well-designed to capture economic growth. The ratings also reflect a low long-term liability burden and historically strong control over revenues and spending that, in conjunction with a sophisticated approach to reserve funding, leaves Minnesota well positioned to manage through economic cycles while maintaining a high level of financial flexibility.”

In affirming Minnesota’s AAA rating, Moody’s Investors Service stated, “Minnesota's long-term economic fundamentals remain very strong stemming from low unemployment, high per capita incomes, high workforce participation, high educational attainment, and a diverse mix of industry.”

In affirming Minnesota’s AAA rating, S&P Global stated, “Minnesota's robust management, with regular and comprehensive multiyear revenue forecasting, focus on matching recurring expenditures with recurring revenue, and commitment to maintaining healthy reserve balances, continues to support the state's 'AAA' credit quality.”