The good news, as the News Tribune puts it, is that Duluth’s finances and tax capacity are in good enough shape to guarantee an excellent bond rating for the City. This is how both Moody’s and Standard & Poor’s evaluated Duluth as it puts its biggest ever bond into effect – a $40 million behemoth to finance the DECC expansion. Keep in mind, of course, that this will mostly be paid for by tourists at our hotels and restaurants. Also keep in mind that it is dwarfed by the $293 million in bonding for the School District’s Red Plan which will be paid entirely by local residents.
What the advisors at Moody’s know is important. Government can raise taxes to pay off their debts and the taxpayers can do little about it. That’s why we will all be on the hook if the Federal Government guarantees Fannie Mae and Freddie Mac for encouraging so many sub prime loans. That’s why we will all be on the hook if the Duluth School Board gets away with the Red Plan.
To that point I found this quote from the rating’s agencies interesting:
“However, if city leaders lacked ‘political will’ to use that money – required by a 7/9 vote of the City Council – it ‘could shift our analytic conclusions regarding overall operating liquidity.'”
In other words, If the voters of Duluth lean on their politicians not to raise taxes the bonding community will punish Duluth. Its nice to have friends.
