Agenda - Council - 06/26/2018 - Laserfiche WebLink

Home

Summary: Ramsey, Minnesota; General Obligation if necessary. Its $68.4 million in cash and investments in 2017 were held primarily in certificates of deposit, municipal bonds, and U.S. agency securities, which we do not consider aggressive investments. The city has strong access to external liquidity, in our opinion, because of its history issuing GO debt over the last two decades. We expect liquidity to remain very strong. Adequate debt and contingent liability profile In our view, Ramsey's debt and contingent liability profile is adequate. Total governmental fund debt service is 17.6% of total governmental fund expenditures, and net direct debt is 156.8% of total governmental fund revenue. Overall net debt is low at 2.5% of market value, and approximately 74.1% of the direct debt is scheduled to be repaid within 10 years, which are, in our view, positive credit factors. The city indicates that it may issue up to $2 million in GO debt within the next year for road improvements. It has no variable -rate or private -placement debt outstanding. Ramsey's combined required pension and actual other postemployment benefit (OPEB) contributions totaled 3.6% of total governmental fund expenditures in 2017. The city made its full annual required pension contribution in 2017. The city participates in two cost -sharing multiple -employer pension plans, including the General Employees Retirement Fund (GERF) and the Public Employees Police and Fire Fund (PEPFF). Required pension contributions to these plans are determined by state statute. Statutory contributions have generally not kept pace with actuarially determined contribution (ADC) rates, indicating the potential for future payment acceleration. The state recently passed pension legislation that will marginally increase contributions (for PEPFF only), reduce the investment rate of return to 7.5% (from 8%), and reduce some employee benefits (primarily cost -of -living adjustments). While we view these as positive changes for future plan funding levels, the lack of an actuarial funding policy remains a weakness in these plans. The PEPFF and GERF were 85.4% and 75.9% funded, respectively, in fiscal 2017. The city's proportionate share of the net pension liability for these plans totaled $6.5 million. We consider historical plan funding levels somewhat weak, and we believe that the history of pension contributions below ADC increases the risk of payment acceleration. Additionally, in our view, the plan investment portfolios are exposed to significant market risk, with only 22% of its investments allocated to fixed income and cash, which increases the risk for volatility in funding levels. Despite these weaknesses, we believe the city has sufficient taxing and operational flexibility to manage future increases in pension contributions. However, in the future, if pension contributions absorb a larger share of the city's budget, our view of its debt and contingent liability profile could weaken. The city maintains a single -employer plan for OPEBs, which it funds on a pay-as-you-go basis. We understand its liabilities for the plan are limited to the implicit rate subsidy as the city makes no contributions towards retiree health care premiums. Strong institutional framework The institutional framework score for Minnesota cities with a population greater than 2,500 is strong. WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JUNE 21, 2018 4