M-10 - Ratings Summary Report

Summary: Tiffin, Iowa; General Obligation Credit Profile US$3.75 mil GO corp purp bnds ser 2024A due 06/02/2032 Long Term Rating A+/Stable New Credit Highlights • S&P Global Ratings assigned its 'A+' long-term rating to Tiffin, Iowa's anticipated $3.75 million series 2024A general obligation (GO) corporate purpose bonds. • The outlook is stable. Security The city's unlimited ad valorem taxing power secures its GO bonds. Tiffin will apply bond proceeds to fund various capital projects. Credit overview Pervading the various aspects of Tiffin's credit profile is its extraordinary rate of growth. Ongoing population growth and housing development have translated to a high rate of revenue growth for the residential and property tax-reliant (61% of fiscal 2023 operating revenue) city located just outside of Iowa City. Revenue growth has at least kept pace with rising expenditures, helping the city's available reserves reach extremely strong levels. While growth has been a boon for the city's finances, it also brings about rising service costs and capital needs to accommodate a growing population. As such, we expect general fund results to moderate as costs continue to rise. Key credit factors include the city's: • Ongoing rapid population and tax base growth, supported by its ample developable land and proximity to Iowa City, with slightly above-average income metrics. • Performance we expect to be strong given the city's recently robust operating results, ongoing property tax revenue growth, and a new sales tax that will somewhat help offset substantially increasing operating and capital costs. • Very strong budgetary flexibility with available reserves at more than 200% of expenditures and our expectation that reserves will remain very strong, even as this assessment is somewhat tempered by the city's use of cash-basis accounting. • Standard financial management policies and practices, and strong institutional framework. • Debt and liabilities assessment we expect to remain weak given a high and rising debt burden as the city makes investments to accommodate its rising population and infrastructure needs. Carrying charges are elevated, typically accounting for over a third of governmental fund expenditures. This is somewhat mitigated by low risk from a well-funded pension liability, as well as by rapid debt amortization.