M-10 - Ratings Summary Report

Environmental, social, and governance We consider the city's ongoing extraordinary rate of population growth social opportunity, as this drives growth in the city's operating revenue streams. However, a high rate of growth can also present credit challenges. If growth slows rapidly, the city could be left with higher capital and service costs but stagnant or declining tax revenue, limiting financial and borrowing flexibility. The city has experienced some flooding in the past, primarily related to Clear Creek. However, very little development exists along Clear Creek and we believe the tax base is not subject to elevated flood risk. The city's governance risks are credit neutral within our analysis. Outlook The stable outlook reflects our expectation that the city will maintain robust available reserves that are comfortably very strong relative to rising expenditures, supported by continued tax revenue growth including those provided by its new local option sales tax. Downside scenario If the city's rising service, capital, and debt service costs are met with a significant slowdown in growth, such that tax revenue growth fails to keep pace with rising costs, leading to operating deficits and material fund balance declines, we could lower the rating. We could also lower the rating if revenue growth doesn't offset rising debt service costs and debt service carrying charges. Upside scenario While we do not expect to raise the rating in the near-term, if Tiffin's income metrics improve while it successfully manages its rapid growth, sustains available reserves near current levels relative to expenditures, and continues to post routine operating surpluses. Maintaining manageable, if elevated, debt service carrying charges and strengthening its suite of financial policies are additional factors that could support upward rating movement. Credit Opinion Economic profile benefits from extraordinary growth, which is ongoing City population growth has been rapid, increasing 132% from 2010 to 2020, per the U.S. Census Bureau, and rising another 7% through 2022 per the Census Bureau's estimates. City estimates suggest even stronger growth, with an estimated population of 6,364 in 2024, or a 41% increase from 2020's Census figure. Age dispersion data shows the city has attracted many families with working-age parents and younger children, which we believe will contribute to economic stability. The city's tax base is heavily residential, which we believe supports revenue stability and predictability for property tax-reliant municipalities. The tax base was 86% residential as of the most recent valuation. Management reports the city's location adjacent to Iowa City, University of Iowa, as well as its ample developable land, are likely to continue driving rapid growth. Management expects the population to more than triple during the next couple of decades and is planning utility infrastructure projects for the early 2030s to ultimately accommodate a population of over 20,000 residents.