Chisago County Administrator Bruce Messelt said at the board’s Aug. 20 meeting that the county is currently in good financial standing with a bond rating of AA2, but there is a “50-50” chance the county’s bond rating could be downgraded.
He explained that the recent downgrades in North Branch’s bond rating and North Branch Water and Light, the city’s utility provider, could have negative repercussions for the county as a whole.
“Any time your largest city gets a downgrade, it’s a pretty strong warning about things that may be coming (the county’s) way,” he said.
Commissioner Ben Montzka then asked Messelt to explain North Branch’s downgrade.
“Because of the high debt and the questionable revenue repayment streams, the power and light company in North Branch, and as a result of that the city, was downgraded to just one step above junk bond status,” Messelt said. “It was quite a significant downgrade.”
The county administrator added: “What does that mean? It means they’re still considered a preferred debtor. They will still get bonds if they want to sell them. They’ll still get very attractive rates. But they’re going to pay higher rates than we would, for instance, or someone with a AAA rating.”
Even though the county doesn’t control what happens in North Branch, Messelt said bond rating agencies take into account how cities within a county are doing when it comes time to give county ratings.
“The larger concern is that when we go for a rating, the rating agencies will look at the regional economy, and they’ll look at your largest communities,” he said. “They’ll look at our own house and how we manage debt. We only have control over a certain number of those pieces.”
Messelt said the county could keep operating at its current status quo, and the bond rating agencies could still issue a downgrade because of North Branch’s current bond rating.
“We may not even have to issue debt and we’ll see a downgrade,” Messelt said.