AAA credit rating is OK in Eagan, Burnsville and Apple Valley

While the United States was bemoaning a downgrade of its coveted AAA credit rating this month, city officials in several Dakota County communities remained relatively calm.

The reason: The Dakota County municipalities of Eagan, Burnsville and Apple Valley still have golden AAA ratings, having been elevated to that lofty position last year.

"I don't think we were too concerned about what was going on in Washington," said Tom Lawell, Apple Valley's city administrator.

So while some jurisdictions around the United States faced possible downgrades themselves and even potential bankruptcy, the three cities still are saving tens of thousands of dollars each year in borrowing costs.

"All cities borrow," said Burnsville City Council Member Mary Sherry. "But the city has been very conservative with its finances."

Eagan and Apple Valley make the same claim. As a result, the three cities were not among the entities that Moody's Investors Service warned of a possible downgrade because of the troubles in Washington D.C.

Included on a list of 177 AAA jurisdictions nationwide facing a potential downgrade were cities such as Minneapolis and Wayzata; counties such as Dakota, Hennepin and Ramsey; Edina schools, and five other local government operations in Minnesota.

The ratings reflect the credit-worthiness of a jurisdiction and its borrowing costs. If the rating goes down, the cost of borrowing for such things as schools, roads and other infrastructure goes up.

The Dakota County cities said they were not too concerned they might be downgraded because they have low exposure to federal funding. They also have a low debt ratio.

"We don't have a dependency on federal revenues," Lawell said. "We don't even have dependency on state revenues."

Another factor is that the three cities have very stable political climates, in sharp contrast to the political instability that Standard & Poor's cited in its downgrade of the United States' AAA credit rating.

Upgraded last year

"We were not surprised," said Gene VanOverbeke, Eagan's director of administrative services. "We always thought that we were a pretty strong AA-one. They like the notion that Eagan has fairly strong wealth and income in the community."

In Burnsville's case, city officials said their low debt ratio also played a part, as the city has aggressively kept costs down through the use of refinances and a pay-as-you-go mentality for major projects.

"We do have low debt," said Tom Hansen, Burnsville's assistant city manager.

As a result, the city is able to get the best, lowest interest rates on loans and financing, which the city estimates saves Burnsville tens of thousands of dollars each year, said Kelly Strey, the city's interim finance director.

Like all clients, the three pay the ratings agencies to evaluate their debt and offerings for investors. By doing so, the city has an impartial evaluation of its credit risks of a project.