MANKATO — A rough week on Wall Street, an airline crash and a good report on Mankato's municipal management combined to save city taxpayers nearly $400,000 earlier this week.
Nervous investors Monday morning were looking for a safe haven for some of their portfolio just as Mankato was selling $8.6 million in bonds to finance routine street reconstruction projects, said Terri Heaton of Springsted Financial Advisors, the city's bond agent.
"There's a problem with the airlines ... and some other things that have people a little jittery," Heaton told the council.
The stock market plunged last week — the worst week for stocks of 2019. Then on Sunday, a Boeing 737 crashed in Ethiopia, sending Boeing stocks down sharply Monday morning. The overall stock market followed, dropping more than 200 points at about the time Mankato was offering its bonds for sale.
With a relatively low supply of bonds available Monday, 11 firms jumped on Mankato's offer with Robert Baird and Co. offering an interest rate of 2.15 percent — much lower than Springsted's previous estimate of 2.82 percent.
"Whenever we have a little problem with our estimation, this is the type of problem I like to have," Heaton said. "... The interest costs will be about $375,000 less over the life of the bonds."
So, Mankato's "timing was impeccable," she said, while also crediting city leaders' management efforts. The city's credit rating remains at AA status — which is strong but still a couple of notches below the gold-standard rating of AAA.
What's different is in the details of the city's credit report, where the assessment of Mankato's budgetary management was upgraded from its traditional status of "good."
"It moved you to a 'very strong' and that's the highest category you can get," Heaton said, suggesting that bond investors are increasingly looking beyond simply the credit rating. "They're reading your entire credit report, and some of them are making their own assessment."
The report showed that Mankato has a growing and diverse economy and that city leaders have reduced levels of debt and boosted financial monitoring and transparency in recent years.
Heaton suggested the city could see its credit rating rise in the next two to five years, although it remains unlikely it will reach the AAA status held by 15 Minnesota cities, mostly in the Twin Cities metro area, that have much larger property tax bases than Mankato.
"They're looking very hard at a AA-plus," Heaton said of the bond rating companies.