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Moody's Upgrade of City of Dubuque's Issuer Rating and BondsCity of Dubuque City Council Meeting Action Items # 01. Copyrighted July 17, 2023 ITEM TITLE: Moody's Upgrade of City of Dubuque's Issuer Rating and Bonds SUMMARY: City Manager providing information from Moody's Investors Services regarding their upgrade of the City of Dubuque's issuer rating outstanding general obligation unlimited tax bonds to Aa2 from Aa3, as well as its outstanding moral obligation Sales Tax Increment Revenue Bonds, Senior Bond Series 2015A to Al from A2. A copy of the City of Dubuque Fiscal Year 2024 Dollars and Cents brochure is also provided. SUGGESTED Suggested Disposition: Receive and File DISPOSITION: ATTACHMENTS: Description Press Release Dollars and Cents Type Supporting Documentation Supporting Documentation MOODY'S Rating Action: Moody's upgrades City of Dubuque, IA's issuer and GO to Aa2; Moral Ob. to Al 10 Jul 2023 New York, July 10, 2023 — Moody's Investors Service has upgraded the City of Dubuque, IA's issuer rating and outstanding general obligation unlimited tax (GOULT) bonds to Aa2 from Aa3, as well as its outstanding moral obligation Sales Tax Increment Revenue Bonds (Annual Appropriation Property Tax Supported), Senior Bond Series 2015A to Al from A2. Moody's has also assigned a Aa2 to the city's Taxable General Obligation Corporate Purpose Bonds, Series 2023Awith an proposed par amount of roughly $6 million. Post -issuance, the city will have around $85 million of outstanding GOULT debt. imai1►CeiamaIII Ce7►/_1mzi The issuer rating was upgraded to Aa2 because the city has strong financial operations and ample revenue -raising flexibility, which has resulted in steadily improved available fund balance and cash. The city serves as a regional economic center and its regional economic growth rate has outpaced the nation over the past five years. The city's local economy is likely to remain strong because of its mix of commercial and industrial industries, stable population and steady tax base growth. Resident wealth and income ratios are a little below rated peers, in part because of a large student population. Leverage is elevated and could grow further because of outstanding capital needs. The absence of distinction between the Aa2 rating on the district's GOULT debt and the Aa2 issuer rating is based on the city's full faith and credit pledge with authority to raise ad valorem property taxes unlimited as to rate or amount. The city's moral obligation bonds (Annual Appropriation Tax Supported, Series 2015A) are rated two notches below the city's issuer rating, which reflects the city's pledge to consider appropriating from its debt service levy to replenish the debt service reserve fund if it is drawn upon. The rating also considers the more essential nature of the financed projects (flood mitigation) and adequate coverage of pledged sales tax revenue. RATING OUTLOOK Moody's does not typically assign outlooks to local governments with this amount of debt. FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS - Moderated debt burden and capital needs - Continued economic activity that drives improvement in resident income and full value per capita ratios FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS - Substantial decline in reserves - Significant increase in leverage LEGAL SECURITY The city's GOULT debt, including the current issuances, are backed by the city's unlimited taxing power. The city is required to levy ad valorem taxes upon all taxable property in the city without limit as to rate or amount sufficient to pay the debt service except to the extent that other monies are deposited in the debt service fund for such purposes. The city's moral obligation bonds (Annual Appropriation Tax Supported, Series 2015A) are backed by a senior lien on pledged sales tax increment revenues collected and distributed by the state. The bonds also benefit from a standby levy of debt service taxes, which are subject to the city's moral obligation pledge to consider appropriating from its debt service levy to replenish the debt service reserve if it is drawn upon. USE OF PROCEEDS Proceeds of the Series 2023A bond will finance repairs and improvements to the city's municipal buildings, parking ramp facilities, Five Flag Arena facilities, and the Mystique Community Ice Center (Dubuque Ice Arena) Settling Remediation and Building Improvements Project, as well as paying certain costs of issuance related to the bonds. PROFILE The City of Dubuque is a regional economic center located on the Mississippi River in northeastern Iowa (Aaa stable), bounded by Wisconsin (Aa1 stable) on the northeast and Illinois (A3 stable) on the southeast. The city is roughly 63 miles northeast of Cedar Rapids (Aa1 stable) and has a population of about 59,000. METHODOLOGY The principal methodology used in these ratings was US Cities and Counties Methodology published in November 2022 and available at https://ratings.moodys.com/rmc-documents/386953. Alternatively, please see the Rating Methodologies page on https:Hratings.moodys.com for a copy of this methodology. REGULATORY DISCLOSURES For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found on https://ratings.moodys.com/rating-definitions. For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the issuer/deal page for the respective issuer on https:#ratings.moodys.com. Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review. Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at hftps:#ratings.moodys.com/documents/PBC-1 288235. Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating. Please see the issuer/deal page on https:#ratings.moodys.com for additional regulatory disclosures for each credit rating. Tatum Drazen Lead Analyst REGIONAL_MIDWEST Moody's Investors Service, Inc. 100 N Riverside Plaza Suite 2220 Chicago 60606 JOURNALISTS: 1 212 553 0376 Client Service: 1212 5531653 David Strungis Additional Contact REGIONAL_MIDWEST JOURNALISTS: 1 212 553 0376 Client Service: 1212 5531653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A JOURNALISTS: 1 212 553 0376 Client Service: 1212 5531653 © 2023 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved. 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'F? ,7 j;A&iw 7ok Ik.CITY PORTION OF 4 $20.81 $20 $14.79 $15.42 $15.63 $16.03 $16.78 $17.56 $18.26 $15 $11.76 $9.90 $9.96 $10.53 - $5 $0 11P -1P off\ o� Jos Ilk" Ko, OJQJ Q Q�`b �S�O� O�JpJ S`oJ4 \ova Q°IoQ �s�� $10 • $25 City Property Tax Rate Comparison City of Dubuque FY2024 Property Tax Rate • $9.9013 per thousand dollars assessed value • Increase of 1.90% from FY2023 rope ype Avg. Property op Change from FY2023 from FY20: Residential $23.25 more 2.94% increase Commercial $268.52 more 8.77% increase Industrial $296.26 more 6.55% increase n 7,11 a M T ■ Highest -ranked city (Waterloo - $20.81) is 110%higher than Dubuque ■ Average of other 10 cities ($14.79) is 49%higher than Dubuque FY2023 Consolidated Rate of 30.55266 NICC 3.0% Other 2.2% n 7,11 a M T ■ Highest -ranked city (Waterloo - $20.81) is 110%higher than Dubuque ■ Average of other 10 cities ($14.79) is 49%higher than Dubuque FY2023 Consolidated Rate of 30.55266 NICC 3.0% Other 2.2% CITY BUDGET The City's total budget for FY2024 is $237,525,419 The City of Dubuque's Fiscal Year (FY) 2024 budget runs from July 1, 2023, through June 30, 2024. The budget has two primary components: the operating budget and the capital budget. The operating budget includes personnel costs and annual facility operating costs. It is funded primarily through local property and sales taxes. The capital budget funds major improvements to City facilities and infrastructure. The capital budget is supported through multiple funding sources, including federal and state grants. FY2024 City Budget Major Funds . General Fund $18 ,,022,408 $115,000 Water Fund $9,777,127 $11,658,760 Sanitary Sewer Fund $12,440,629 $9,560,442 Stormwater Fund $4,872,784 $524,920 Refuse $3,827,298 $462,454 Parking $2,832,267 $106,409 The general fund is the operating fund for general City departments and their programs/services, such as public safety, culture & recreation, health & social services, and general government. How General Fund Money is Spent CategoryPortion ublic Safety of General Fund 42.5% Culture & Recreation 18.7% General Government 15.3% Public Works 8.9% Community & Economic Development 6.6% Capital Projects 0.1% Health & Social Services 1.4% Debt Service 0.2% Other 6.3% General Fund Reserve Projections The City maintains a general fund reserve, or working balance, to allow for unforeseen expenses that may occur. The goal is to have at least a 20% reserve. What's Included in Your Monthly Utility Bill? FY24 Rate: ater I Avg. Household Rate: $35.82 / month* (8% increase from FY2023) Sanitary Sewer VCurbsi o1Iectio (Trash &recycling Avg. Household Rate: $50.22 / month*** (6% increase from FY2023) Basic Rate $15.83/month* (2.93% increase from FY2023) Curbside collection of recycling is no extra charge. Stormwater Avg. Household Rate: $10.00 / month** (11.11% increase increase from FY2023) Ranking Among Iowa's Largest Cities: 2nd Lowest (Highest, West Des Moines, is 20% higher than Dubuque, and average is 8% higher than Dubuque) 4th Highest (Highest, Davenport, is 21% higher than Dubuque, and average is 15% lower than Dubuque) Lowest (Highest, Ames, is 84% higher than Dubuque, and average is 36% higher than Dubuque) 2nd Highest (Highest, Des Moines, is 64% higher than Dubuque, and average is 34% lower than Dubuque) $350 $295.5 $300 $250 $200 $150 $100 $50 Total Debt (in millions) Debt is being issued each year, but more is being retired than is issued. $250.0 *Forgivable SRF debt is not shown (FY24 $4,813,335; FY25 $9,654,750; FY26 $9,694,980; FY27 $4,655,835; and FY28 $157,500) — (FY2024 Adopted) $277.2 $155.9 $o 1 FYI FYI FYI FYI FYI FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 100% 90% Statutory Debt Limit Used 90% This chart shows the percentage of statutory debt limit in 80% the Fiscal Year (FY) 2024 budget. By FY2033, the City will 70% be at 23% of the statutory debt limit. 60°% 50% 41 % 40% 30% 20% 23% 10% (FY2024 Adopted) 0% FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 F 90°% 80 % 70 % 60% 50% 40% 30% 20 % 10% Comparison of Statutory Debt Limit Utilized 81% (FY2022) 60% 54% 54% 52% 51% 45% 41% Dubuque ranks as the fifth lowest and is below 31 the average of the other cities. The average is 24% ° o 19 /0 19 /o 10% higher than Dubuque and the highest (Des Moines, 81%) is 100% higher than Dubuque. QJaF OJ ye' QJbc OJ Q�aS QJ�eZ� \O\J\\S o�a�� \ JJG G� The City of Dubuque's use of debt can be compared to many average homeowners who borrow to buy their home. The City has borrowed money at low interest rates to invest in infrastructure. Unlike the federal government, the City does not borrow money to cover operating expenses. # Project Description and Amount Outstanding 1 Stormwater Improvements $70,680,924 2 Water & Resource Recovery Center $50,195,000 3 Water Improvements $27,025,430 4 Sanitary Sewer Improvements $19,327,399 5 Parking Improvements $25,213,340 6 Downtown TIF Incentives/Improvements $19,327,482 7 Industrial Park Expansions $10,897,224 8 Park and Recreation Improvements $6,973,814 9 Public Safety Improvements $4,406,310 10 TIF Rebates/Bonds to Businesses $3,916,272 Total $239,824,195 * $167 million has been spent on street improvements from 1997-2022. Over 52 miles of streets have been resurfaced or reconstructed in the last 5 years. CM034-041923