Moody's Investors Service Annual Issuer Comment on Outstanding_Water Revenue Bonds Copyrig hted
October 19, 2020
City of Dubuque Consent Items # 15.
City Council Meeting
ITEM TITLE: Moody's Investors Service Annual Issuer Comment on Outstanding
Water Revenue Bonds
SUM MARY: City Manager submitting the annual issuer comment report from Moody's
I nvestors Service on the outstanding water revenue bonds and
affirming the City's credit rating of A2.
SUGGESTED Suggested Disposition: Receive and File;Approve
DISPOSITION:
ATTACHMENTS:
Description Type
MVM Memo City Manager Memo
Staff Memo Staff Memo
Moody's Annual Issuer Comment on Outstanding Supporting Documentation
Water Revenue Bonds
Dubuque
THE CTTY O� �
D 1fl-America Ciiy
UB E µ.��:�ti���, �,
i I j�r
I �
ML�ste i�ce on t�le Mississi i zflo�•�oiz-zois
�P pp zoi��za�9
TO: The Honorable Mayor and City Council Members
FROM: Michael C. Van Milligen, City Manager
SUBJECT: Moody's Investors Service Annual Issuer Comment on Outstanding Water
Revenue Bonds
DATE: October 8, 2020
Director of Finance and Budget Jennifer Larson is submitting the annual issuer
comment report from Moody's Investors Service on the outstanding water revenue
bonds. Moody's Investors Service affirmed the City's credit rating of A2.
Moody's Investors Service reviews all its ratings annually in accordance with
regulations. Moody's conducts these periodic reviews through portfolio reviews in which
Moody's reassesses the appropriateness of each outstanding rating in the context of the
relevant principal methodologies, recent developments, and a comparison of the
financial and operating profile similarly to rated peers. Moody's issues a press release
following each periodic review announcing its completion.
I concur with the recommendation and respectfully request Mayor and City Council
approval.
�JC/"'r�"� �y�,t
Michael C. Van Milligen
MCVM/jml
Attachment
cc: Crenna Brumwell, City Attorney
Cori Burbach, Assistant City Manager
Jennifer Larson, Director of Finance and Budget
Dubuque
THE CITY OF �
All•A�eri�a Ciry
DuB E ���,,��a.��;.����
� �, � ►
� �
Maste iece on the Mississi i zoo�•zo��•zo�3
� pp 2017*2019
TO: Michael C. Van Milligen, City Manager
FROM: Jennifer Larson, Director of Finance and Budget
SUBJECT: Moody's Investors Service Annual Issuer Comment on Outstanding Water
Revenue Bonds
DATE: October 8, 2020
INTRODUCTION
The City of Dubuque received the annual issuer comment report from Moody's Investors
Service on the outstanding water revenue bonds. Moody's Investors Service affirmed the
City's credit rating of A2 on the water revenue bonds.
BACKGROUND
Moody's provides credit ratings and research covering debt instruments and securities. The
purpose of Moody's ratings is to provide investors with a simple system to gauge future
relative creditworthiness of securities. The firm uses nine rating classifications to designate
least credit risk to greatest credit risk: Aaa, Aa, A, Baa, Ba, B, Caa, Ca, and C. Moody's
appends numerical modifiers 1, 2, and 3 to each rating classification.
Moody's Investors Service reviews all its ratings annually in accordance with regulations.
Moody's conducts these periodic reviews through portfolio reviews in which Moody's
reassesses the appropriateness of each outstanding rating in the context of the relevant
principal methodologies, recent developments, and a comparison of the financial and
operating profile similarly to rated peers. Moody's issues a press release following each
periodic review announcing its completion.
DISCUSSION
The Issuer Comment report from Moody's Investors Service was overall positive.
The report cited:
• Dubuque Water's credit position is solid. That said, its A2 rating is under the median
rating of Aa3 for water systems nationwide. Notable credit factors include a
moderate-income service area, robust liquidity, an affordable debt profile, but a
small system size and marginal debt service coverage.
• The system profile of Dubuque Water is satisfactory overall and is consistent with
the assigned rating of A2. The median family income is 91.2% of the US level. On
the other hand, the system size, measured as operating and maintenance expenses
($5.8 million), is similar to the US median.
• The financial position of Dubuque Water is exceedingly healthy overall and is
exceptionally strong relative to its A2 rating. The days cash on hand (458 days) is
excellent and greatly exceeds the US median, and it has improved significantly from
2015 to 2019. However, the debt to operating revenues (3.Ox) is elevated and
above other Moody's rated water systems nationwide. Additionally, the coverage of
the annual debt service by net revenues (1.1x) is narrow and well below the US
median.
• Legal provisions, which typically include a rate covenant requiring a minimum of 1.Ox
coverage of debt service, are adequate for this sector.
ACTION REQUESTED
This memorandum is for informational purposes only.
Attachments
JML
2
� � �
� . .
ISSUER COMMENT City of Dubuque
2 October 2020
Annua� Comment on Dubuque Water
RATING
Revenue� Issuer Profile
nz "o oUt�ook Dubuque Water provides water service to the City of Dubuque in Dubuque County, lowa.
The county has a population of 96,802 and a moderate population density of 159 people per
square mile.The county's median family income is $76,319 (1st quartile) and the July 2020
contacts unemployment rate was 7% (2nd quartile)2.The System draws its raw water from a total
MichaelArmstrong +1312706.9975 of nine wells,treats it at its own Eagle Point Water Plant,and distributes via a series of pipes
AssociateLeadAnalyst and booster stations.
michael.armstrong@moodys.com
Rachel Cortez +1312.706.9956 Credit Overview
AssociateManagingDirector Dubuque Water's credit position is solid.That said, its A2 rating is under the median rating of
rachel.cortez@moodys.com Aa3 for water systems nationwide. Notable credit factors indude a moderate income service
area, robust�iquidity,an affordable debt profile, but a smal�system size and marginal debt
CLIENT SERVICES service coverage.
Americas 1-212-553-1653
System Characteristics:The system profile of Dubuque Water is satisfactory overall and is
Asia Pacific 852-3551-3077 consistent with the assigned rating of A2.The median family income is 91.2%of the US level.
Japan 81-3-5408-4100 On the other hand,the system size, measured as operating and maintenance expenses ($5.8
EMEA 44-20-7772-5454 mil�ion), is similar to the US median.
Financial Strength:The financial position of Dubuque Water is exceeding�y hea�thy overall
and is exceptionally strong relative to its AZ rating.The days cash on hand (458 days) is
excellent and greatly exceeds the US median,and it has improved significantly from 2015 to
2019. However,the debt to operating revenues (3.Ox) is elevated and above other Moody's-
rated water systems nationwide.Additionally,the coverage of the annual debt service by net
revenues (1.1x) is narrow and well below the US median.
Legal Provisions: Legal provisions,which typically indude a rate covenant requiring a
minimum of 1.Ox coverage of debt service,are adequate for this sector.
Sector Trends - lowa Water
lowa water and sewer systems'asset condition,as measured by median age of plant, is
comparable to systems across the US. lowa systems'financia�metrics are general�y better
than the US median. Median debt service coverage of 1.9x and median available liquidity
of 54Z days cash are both of Aaa-caliber quality. Utilities maintain somewhat low leverage
at 1.4x operating revenue.Water in lowa is abundant,and few water utilities face supply
constraints.All utilities have unlimited rate-setting autonomy,which supports financial
stability.
... .•
EXHIBIT 1
Key Indicators 3 4 Dubuque Water
Credit Metrics 2d15 2016 2017 2d18 2d19 US Median Credit Trend
Annual Debt 5ervice Co�erage (x) 0.85x 2.40x 2.24x 1.b2x 1.11x 2.10x Stable
Days Cash on Hand (Days) 155 248 422 550 45$ 41$ Impro�ed
Debt to Operating Revenues(x) 3.Ox 2.6x 3.Ox 3.1x 3.Ox 1.8x Stable
Median Family Income(°10 of US
90% 89% 91% 91% 91% 100% Stable
Median)
Remaining Useful Life of Capital Assets 35 41 37 34 38 31 Stable
(Years}
Debt and Financial Data($DDDs) 2015 2d16 2d17 2d18 2019 US Median
Net Funded Debt $Z2,429 $22,223 $25,768 $27,998 $Z5,645 $30,Z91
Total Revenues $7,612 $8,516 $8,590 $8,966 $9,162 $15,274
Operating and Maintenance
$b,3b9 $4,839 $4,�53 $5,045 $5,795 $8,544
Expenses
Net Revenues $1,243 $3,676 $3,937 $3,922 $3,3b8 $7,109
Debt Ser�ice $1,4b3 $1,530 $1,755 $2,424 $3,045 $3,002
GovernancelLegal Provisions Score
Rate Management Aa
Regulatory Compliance and
Capital Planning A
Rate Covenant Aa
Debt Service Reserve
Requirement
Aa
Source:Moody's Investors Service
EXHIBIT 2
Days cash on hand has increased from 2015 to 2019
�Days Cash dn Hand L15 Median
SO❑
600
40❑
200
0
2015 2016 2017 2018 2019
Source:Moody's Investors Service
This pubGcation does not announce a credlt rating action.For any credlt ratings referenced in this pubGcation,please see the ratings tab on the issuer/entity page on
www.moodys.com for the most updated credit rating action information and rating history.
2 2 October 2020 City of Dubuque:Annual Comment on Dubuque Water
... .•
EXHIBIT 3
Debt service coverage increased from 2015 to 2019
�Net Revenues Debt Serufce��ebt Servfre Coverage-US Medfan Coverage
3.Ox
$4,000
-----�--' --------- - ---- ----------------
2_Ox
52,00❑
1.Ox
$0
2015 2016 2017 2018 2019
Source:Moody's Investors Service
EXHIBIT 4
Debt to operating revenues decreased from 2015 to 2019
�ebt to Revenues—Medfan�ebt to Revenues
3.Ox
2_Ox
2015 2096 2097 2018 2099
Source:Moody's Investors Service
Endnotes
1 The rating referenced in this report is the rating of the senior most lien on the relevant pledged revenues.Some utilities have bonds separately secured by
distinct revenue sources.For these utilities,the reting referenced in this report is the senior most rating only on the relevant revenue pledge(e.g.,water);
the utility could have a higher rating on a different type of revenue bond(e.g.,sewer).
2 The demographic data presented,including population,population density,per capita personal income and unemployment rate are derived from the most
recently available US government databases.Population,population density and per capita personal income come from the American Community Survey
while the unemployment rate comes from the Bureau of Labor Statistics.
The largest industry sectors are derived from the Bureau of Economic Analysis.Moody's allocated the per capita personal income data and unemployment
data for all counties in the US census into quartiles.The quartiles are ordered from strongest-to-weakest from a credit perspective:the highest per capita
personal income quartile is first quartile,and the lowest unemployment rate is first quartile.
3 Moody's calculations of various statistics can be different than calculations reported in audited financial statements or offering documents.Moody's
makes standard adjustments to reported financial data,to facilitate comparisons across issuers.For definitions of the metrics in the Key Indicators Table,
see our US Municipal Utility Revenue Debt methodology.
4 The medians come from our most recently published report,Medians-Financial performance signals continued stabilitx
3 2 October 2020 City of Dubuque:Annual Comment on Dubuque Water
... .•
�O 2020 Moody's Corporation,Moody's Investors Service,Inc,Moody's Analytics,Inc.and/or their licensors and affiliates(collectively,"MOODY'S").All rights reserved.
CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE,INC.AND/OR ITS CREDIT RATINGS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE
CREDIT RISK OF ENTITIES,CREDIT COMMITMENTS,OR DEBT OR DEBT-LIKE SECURITIES,AND MATERIALS,PRODUCTS,SERVICES AND INFORMATION PUBLISHED BY MOODY'S
(COLLECTIVELY,"PUBLICATIONS")MAY W CLUDE SUCH CURRENT OPINIONS.MOODY'S INVESTORS SERVICE DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY
NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT.SEE
MOODY'S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY'S
INVESTORS SERVICE CREDIT RATINGS.CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK,INCLUDING BUT NOT LIMITED TO:LIQUIDITY RISK,MARKET VALUE RISK,OR
PRICE VOLATILITY.CREDIT RATINGS,NON-CREDIT ASSESSMENTS("ASSESSMENTS"),AND OTHER OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS
OF CURRENT OR HISTORICAL FACT.MOODY'S PUBLICATIONS MAY AL50 INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR
COMMENTARY PUBLISHED BY MOODY'S ANALYTICS,INC.AND/OR ITS AFFILIATES.MOODY'S CREDIT RATWGS,ASSESSMENTS,OTHER OPINIONS AND PUBLICATIONS DO
NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE,AND MOODY'S CREDIT RATINGS,ASSESSMENTS,OTHER OPINIONS AND PUBLICATIONS ARE NOT
AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE,SELL,OR HOLD PARTICULAR SECURITIES.MOODY'S CREDIT RATINGS,ASSESSMENTS,OTHER OPINIONS AND
PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR.MOODY'S ISSUES ITS CREDIT RATINGS,ASSESSMENTS AND
OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL,WITH DUE CARE,MAKE ITS OWN STUDY
AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE,HOLDING,OR SALE.
MOODY'S CREDIT RATINGS,ASSESSMENTS,OTHER OPINIONS,AND PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLE55
AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY'S CREDIT RATINGS,ASSESSMENTS,OTHER OPINIONS OR PUBLICATIONS WHEN MAKING AN INVESTMENT
DECISION.IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY
LAW,INCLUDING BUT NOT LIMITED TO,COPYRIGHT LAW,AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED,REPACKAGED,FURTHER
TRANSMITTED,TRANSFERRED,DISSEMINATED,REDISTRIBUTED OR RESOLD,OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE,IN WHOLE OR IN PART,IN ANY
FORM OR MANNER OR BY ANY MEANS WHATSOEVER,BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT.
MOODY'S CREDIT RATINGS,ASSESSMENTS,OTHER OPINIONS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS
DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAYTHAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.
All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable.Because of the possibility of human or mechanical error as well
as other factors,however,all information contained herein is provided"AS IS"without warranty of any kind.MOODY'S adopts all necessary measures so that the information it
uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable induding,when appropriate,independent third-party sources.However,
MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing its Publications.
To the extent permitted by law,MOODY'S and its directors,officers,employees,agents,representatives,licensors and suppliers disdaim liability to any person or entity for any
indirect,special,consequential,or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any
such information,even if MOODY'S or any of its diredors,officers,employees,agents,representatives,licensors or suppliers is advised in advance of the possibility of such losses or
damages,including but not limited to:(a)any loss of present or prospective profits or(b)any loss or damage arising where the relevant financial instrument is not the subject of a
particular credit rating assigned by MOODY'S.
To the extent permitted by law,MOODY'S and its diredors,officers,employees,agents,representatives,licensors and suppliers disdaim liability for any direct or compensatory
losses or damages caused to any person or entity,including but not limited to by any negligence(but excluding fraud,willful misconduct or any other type of liability that,for the
avoidance of doubt,by law cannot be exduded)on the part of,or any contingency within or beyond the control of,MOODY'S or any of its directors,officers,employees,agents,
representatives,licensors or suppliers,arising from or in connection with the information contained herein or the use of or inability to use any such information.
NO WARRANTY,EXPRESS OR IMPLIED,AS TO THE ACCURACY,TIMELINESS,COMPLETENESS,MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT
RATING,ASSESSMENT,OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.
Moody's Investors Service,Inc.,a wholly-owned credit rating agency subsidiary of Moody's Corporation("MCO"),hereby disdoses that most issuers of debt securities(induding
corporate and municipal bonds,debentures,notes and commercial paper)and preferred stock rated by Moody's Investors Service,Inc.have,prior to assignment of any credit rating,
agreed to pay to Moody's Investors Service,Inc.for credit ratings opinions and services rendered by it fees ranging from$1,000 to approximately$2,700,000.MCO and Moody's
Investors Service also maintain policies and procedures to address the independence of Moody's Investors Service credit ratings and credit rating processes.Information regarding
certain affiliations that may exist between diredors of MCO and rated entities,and between entities who hold credit ratings from Moody's Investors Service and have also publidy
reported to the SEC an ownership interest in MCO of more than S%,is posted annually at www.moodvs.com under the heading"Investor Relations—Corporate Governance—
Director and Shareholder Affiliation Policy."
Additional terms for Australia only:Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate,Moody's Investors
Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569(as applicable).This document is intended
to be provided only to"wholesale dients"within the meaning of section 761G of the Corporations Ad 2001.By continuing to access this document from within Australia,you
represent to MOODY'S that you are,or are accessing the document as a representative of,a"wholesale dient"and that neither you nor the entity you represent will directly or
indirectly disseminate this document or its contents to"retail dients"within the meaning of section 761G of the Corporations Act 2001.MOODY'S credit rating is an opinion as to
the creditworthiness of a debt obligation of the issuer,not on the equity securities of the issuer or any form of security that is available to retail investors.
Additional terms for Japan only:Moody's Japan K.K.("MJKK")is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K.,which is wholly-owned by Moody's
Overseas Holdings Inc,a wholly-owned subsidiary of MCO.Moody's SF Japan K.K.("MSFJ")is a wholly-owned credit rating agency subsidiary of MJKK.MSFJ is not a Nationally
Recognized Statistical Rating Organization("NRSRO").Therefore,credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings.Non-NRSRO Credit Ratings are assigned by an
entity that is not a NRSRO and,consequently,the rated obligation will not qualify for certain types of treatment under U.S.laws.MJKK and MSFJ are credit rating agencies registered
with the Japan Financial Services Agency and their registration numbers are FSA Commissioner(Ratings)No.2 and 3 respectively.
MJKK or MSFJ(as applicable)hereby disdose that most issuers of debt securities(induding corporate and municipal bonds,debentures,notes and commercial paper)and preferred
stock rated by MJKK or MSFJ(as applicable)have,prior to assignment of any credit rating,agreed to pay to MJKK or MSFJ(as applicable)for credit ratings opinions and services
rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.
MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.
REPORT NUMBER 1236135
4 2 October 2020 City of Dubuque:Annual Comment on Dubuque Water
... .•
CLIENT SERVICES
Americas 1-212-553-1653
Asia Pacific 852-3551-3077
Japan 81-3-5408-4100
E M EA 44-20-7772-5454
MOODY'S
INVESTORS SERVICE
5 2 October 2020 City of Dubuque:Annual Comment on Dubuque Water