Municipal Bonds

Each week, the National League of Cities (NLC) puts out a paper called the Nation's Cities Weekly. The cover story in the January 7, 2008 edition was "Municipal Bond Market Relenting to Credit Pressure." The message of the article by Cherie Duvall was that the nation's $2.5 trillion municipal bond market, typically a highly sought-after and safe investment, is being "threatened by the nation's increasing credit crunch and real estate woes, causing some cities to worry about how they'll get money for crucial projects."

In today's market, cities with lower credit ratings are forced to pay higher interest rates on their bonds than they're used to or simply not move forward on projects they need or want to complete. Bond issues are being canceled in some cities because of the possibility of higher interest rates. In some parts of the United States, property values are falling and that means losses in tax revenue and the ability to issue debt. On top of that, companies that have insured municipal bonds in the past, allowing lower-rated cities to obtain lower interest rates, are not stepping up to insure new municipal projects as often because they are covering losses in the mortgage industry.

Duvall points out that states like Maryland and Virginia have good credit ratings and therefore are "largely unaffected" by the bond market's problems. Like these states, the City of West Des Moines is well-equipped to handle these pressures. As one of fewer than 100 cities in the nation with a AAA bond rating from Standard and Poor's, our City continues to see a strong market for our bonds. I'm thankful that strong financial management and economic development have buoyed our City and kept our bonds a credible and safe place to invest. Although the municipal bond market is still considered a very valuable market with historically low interest rates, the recent increases some municipalities are experiencing reiterate the importance of having well-managed finances. In addition, the vibrant business and development community in West Des Moines, along with high numbers of people choosing to live and play here, continue to keep us ahead of some of the nation's lagging indicators. West Des Moines is a great place to live and good things keep happening here, making us a highly rated city in more ways than one.