M-10 - Ratings Summary Report

Debt burden is high and rising, somewhat offset by rapid amortization, while carrying charges will remain elevated We expect the city's debt burden to remain high, reflected in a weak debt and liabilities assessment, given its ongoing rate of growth. The city's capital plan includes plans to issue $26 million in additional GO bonds to support various projects through fiscal 2027. The largest planned projects include a major road project (North Park Road), a new community recreation center, and a new public safety facility. The CIP also includes a new city hall project that management indicates is more likely to occur closer to 2035. Net of amortization of existing debt, these plans would add an estimated $11 million to the city's net direct debt by fiscal year-end 2027. An additional $20 million in GO bonds are currently estimated for fiscals 2028 through 2035 in the city's capital improvement plan. Current debt metrics reflect the city's high leverage, and additional significant property tax base growth will be important to enable the city to manage its rising debt burden. If growth were to stall, leaving the existing tax base saddled with a higher debt burden and carrying charges near or above 50% of governmental fund expenditures, the rating could be pressured downward. Somewhat mitigating this risk is the city's rapid debt amortization, with 86% of debt, including the series 2024A bonds, maturing within the next 10 years. Pensions pose low risk and city does not offer other postemployment benefits The city participates in one pension plan, the Iowa Public Employees' Retirement System, a cost-sharing, multiple-employer, defined-benefit pension plan. The plan is relatively well funded with a funded ratio of 90.1% at June 30, 2023. Pension costs are very low relative to the city's budget. Given a healthy funded ratio and low costs, we do not consider its pension liability as posing credit pressure to the city. The city does not offer other postemployment benefits (OPEBs) and has no OPEB liability. <table> <tr> <th colspan="2">Tiffin, Iowa--key credit metrics</th> <th colspan="3">Most recent</th> <th colspan="3">Historical information</th> </tr> <tr> <th></th> <th></th> <th>2023</th> <th>2022</th> <th>2021</th> <th>2023</th> <th>2022</th> <th>2021</th> </tr> <tr> <th colspan="8">Adequate economy</th> </tr> <tr> <td>Projected per capita EBI % of U.S.</td> <td></td> <td>108</td> <td></td> <td></td> <td></td> <td></td> <td></td> </tr> <tr> <td>Market value per capita ($)</td> <td></td> <td>165,303</td> <td></td> <td></td> <td></td> <td></td> <td></td> </tr> <tr> <td>Population</td> <td></td> <td></td> <td>4,845</td> <td>4,482</td> <td></td> <td></td> <td></td> </tr> <tr> <td>County unemployment rate(%)</td> <td></td> <td></td> <td>2.3</td> <td></td> <td></td> <td></td> <td></td> </tr> <tr> <td>Market value ($000)</td> <td></td> <td>800,892</td> <td>541,351</td> <td></td> <td></td> <td></td> <td></td> </tr> <tr> <td>Ten largest taxpayers % of taxable value</td> <td></td> <td>15.9</td> <td></td> <td></td> <td></td> <td></td> <td></td> </tr> <tr> <th colspan="8">Strong budgetary performance</th> </tr> <tr> <td>Operating fund result % of expenditures</td> <td></td> <td>47.1</td> <td>49.9</td> <td>74.9</td> <td></td> <td></td> <td></td> </tr> <tr> <td>Total governmental fund result % of expenditures</td> <td></td> <td>(21.2)</td> <td>21.2</td> <td>27.8</td> <td></td> <td></td> <td></td> </tr> <tr> <th colspan="8">Very strong budgetary flexibility</th> </tr> <tr> <td>Available reserves % of operating expenditures</td> <td></td> <td>218.8</td> <td>250.0</td> <td>275.4</td> <td></td> <td></td> <td></td> </tr> <tr> <td>Total available reserves ($000)</td> <td></td> <td>5,170</td> <td>4,368</td> <td>3,682</td> <td></td> <td></td> <td></td> </tr> <tr> <th colspan="8">Very strong liquidity</th> </tr> <tr> <td>Total government cash % of governmental fund expenditures</td> <td></td> <td>40</td> <td>54</td> <td>136</td> <td></td> <td></td> <td></td> </tr> <tr> <td>Total government cash % of governmental fund debt service</td> <td></td> <td>161</td> <td>140</td> <td>281</td> <td></td> <td></td> <td></td> </tr> </table>