KBRA assigns the long-term rating of A with a Stable Outlook to the City of Detroit Downtown Development Authority Tax Increment Revenue Refunding Bonds, Series 2024 (Catalyst Development Project). Concurrently, KBRA places the outstanding long-term rating assigned to the Tax Increment Revenue Refunding Bonds, Series 2018A (Catalyst Development Project) on Watch-Developing, pending the outcome of the planned financing.

Key Credit Considerations

The rating was assigned because of the following key credit considerations:

Credit Positives

• FY 2023 Pledged Revenues provide pro forma 4.25x MADS coverage.
• No additional parity bonds are permitted, with the exception of refunding bonds for savings.
• Established growth trend in Pledged Revenues.
• Plans for further substantial private investment within the District boundaries that, despite not directly increasing Pledged Revenues, will further support taxable property valuation.

Credit Challenges

• Despite an overall improving trend and an ongoing rebound as the pandemic wanes, the Detroit economy remains fragile, and if a substantial economic decline occurs in the near future, before the taxable property values have a chance to further stabilize, then debt service coverage ratios could weaken.
• Potential for assessment reductions due to lower office space demand resulting from hybrid working arrangements.

Rating Sensitivities

For Upgrade

• Significant development and diversification in the District that is reflected in Pledged Revenue increases and higher debt service coverage.

For Downgrade

• Declining property values, reduced investments, or other economic factors that weaken the available Pledged Revenues in the District further than current stress scenarios.
• Any change to the City’s or Wayne County’s tax practices that erodes DDA’s current insulation from historically weak county-wide property tax collections.
• Any actions by the City, State, County, or other taxing entities to reduce tax rates, reduce taxable property value, or in any other way weaken the Pledged Revenues.

To access rating and relevant documents, click here.

Methodologies

• Public Finance: General Property Tax/Assessment Revenue Methodology
• ESG Global Rating Methodology

Disclosures

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.

Doc ID: 1004643

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