Moody's removes 'negative' outlook on city's credit rating

November 29, 2018   Hayleigh Colombo

Credit rating agency Moody’s affirmed the city of Indianapolis’ financial path under Mayor Joe Hogsett by revising its former “negative” outlook on the city’s overall Aaa credit rating to a “stable” outlook.

Moody’s also this week assigned an initial Aa2 rating to $30 million in revenue bonds issued this year by the Indianapolis Bond Bank to pay for long-term transportation planning.

Moody’s, in a press release, said the "stable outlook reflects our expectation for continued growth in tax base valuation and the maintenance of ample operating reserves." The city's Aaa rating is technically on $119.4 million of outstanding general obligation limited tax debt.

"These strengths should continue to offset credit challenges, positioning the city in the Aaa category for the foreseeable future," according to Moody's.

In a separate release, Moody's said its rationale for giving the Aa2 rating to the $30 million in new revenue bonds was “based on a diverse and growing revenue base that is anchored by” the city.

“Indianapolis sits at the center of a broad network of local and regional roadways, including four US interstate highways,” according to the Moody’s release. “This base should provide for continued growth in pledged revenues, which consist of a gas tax and other transportation-related revenue.”

Moody’s had previously rated all Indianapolis ratings as “negative” in 2015.

Hogsett, who spent the first two years of his administration trying to create a “structurally balanced budget,” cheered the news in a press release.

“This upgrade to our credit outlook affirms what we already know – Indianapolis is in a strong fiscal position,” Hogsett said.  “Our strong rating and improved outlook is emblematic of our city’s commitment to consistent and cost-saving initiatives. 

“In turn, these initiatives foster a climate that will continue to attract businesses, a talented workforce, and families who want to relocate to a city that is on firm financial ground and invests in its public safety, infrastructure and neighborhoods."

The Indianapolis mass transit system is set to price the first round of bonds to finance projects under the system’s $522 million, five-year capital plan.

Indianapolis Public Transportation Corporation, marketed to riders as IndyGo, will bring $26 million of local income tax revenue bonds Nov. 8. They are selling through the city's borrowing arm — the Indianapolis Local Public Improvement Bond Bank.

Indianapolis, IN | October 26, 2018
Nora Colomer, The Bond Buyer

Indianapolis is one of 20 cities total to be awarded with resources and technical support to help achieve their ambitious climate goals under Bloomberg American Cities Climate Challenge

INDIANAPOLIS – October 29, 2018 - Today, Bloomberg Philanthropies announced Indianapolis as a winning city in the Bloomberg American Cities Climate Challenge. The Bloomberg American Cities Climate Challenge is a $70 million dollar program that will accelerate 20 ambitious cities’ efforts to tackle climate change and promote a sustainable future for residents. Through the Climate Challenge – which is part of Bloomberg’s American Cities Initiative, a suite of more than $200 million in investments to strengthen city halls and advance critical policies – Indianapolis is accepted into a two-year acceleration program and will be provided powerful new resources and access to cutting-edge support to help meet or beat the city’s near-term carbon reduction goals.

October 26 2018 - Indianapolis' growing record of keeping its finances structurally balanced has earned the city an outlook upgrade from Kroll Bond Ratings Agency.

Kroll raised the outlook to positive and affirmed its AA-plus rating on the city, saying that the city’s financial position continues to demonstrate an ascending trajectory.

“Indianapolis has continued to post improved financial results and, in recent years, has reversed a historical pattern of structural deficits in its General Fund,” Kroll said.

The upgraded outlook comes after the city-county council approved Indy Mayor’s Joe Hogsett's third annual budget on Oct. 15. The budget totaled $1.2 billion, an increase of 4% from the fiscal 2018 budget and the second consecutive structurally balanced budget. As in 2018, the budget does not rely on any reserve draw-down and estimates a small operating surplus and an $80.8 million Fiscal Stability Fund balance.

“In its budget for FY 2019, the city continues to forecast structurally balanced operations by extending its conservative revenue projections, diversifying its funding sources and holding the line of expenses,” said Kroll.

Kroll said that the city has managed to reduce the strain on its general fund operations while increasing overall financial transparency by establishing dedicated revenue sources to fund capital improvements.

Indy has budgeted more than $650 million in capital improvement spending between 2019 and 2022. The city’s storm water projects are funded through capital and debt. The city’s transportation projects, including bridges, streets, and streetlight repairs, are funded from a mix of funds and community grants generated from the state gas tax and matching funds, local funds such as the COIT reserves and external funds such as federal aid.

Kroll rates the city’s general obligations one notch lower than the city’s triple-A marks from Fitch Ratings and Moody’s Investors Service. S&P Global Ratings rates Indianapolis AA after downgrading its AAA rating in 2013.

Total direct debt and overlapping debt for the consolidated city/ Marion County government totals $1.2 billion.

As of Dec. 31, 2017, the City had $135.8 million of GO debt outstanding and another $867.4 million of debt backed by the city’s moral obligation pledge.

The Bond Bank serves as a conduit issuer and provides access to the capital markets for qualified entities, including the city, Marion County, all special taxing districts of the City and County, and all entities whose tax levies are subject to review and modification by the Council and certain authorities.

Indianapolis, IN | October 26, 2018
Nora Colomer, The Bond Buyer

Indianapolis, IN | September 28, 2018
Hayleigh Colombo, The Indianapolis Business Journal

The $572 million Criminal Justice Center won’t open until 2022, at which time scores of city and county employees—working for the courts, public defender, prosecutor, sheriff and other agencies—will move from downtown’s Market East Cultural District 2-1/2 miles east to the Twin Aire neighborhood.

But city officials and businesses are already thinking about how both neighborhoods will be changed by the shift.

Downtown, city leaders see potential for redevelopment that builds off recent successes near the City-County Building, including the opening of Cummins Inc.’s $30 million divisional headquarters and the $120 million Market 360 apartment tower.

They envision that the subtraction of the nearby Jail I and Jail II, and the relocation of a slew of bail bonds businesses, will liven up the area.

Indianapolis, IN | July 20, 2018

In 2017, Director Riordan discovered possible evidence of fraud or abuse in the Bond Bank’s payroll and benefit records beginning as far back as 2008. Director Riordan immediately terminated the employees she had reason to believe were involved and notified law enforcement of potential fraud on June 26, 2017. The Bond Bank made all its records available to the Marion County Prosecutor for review and worked with investigators in a year-long investigation. 

Director Riordan implemented immediate corrective action in consultation with the Bond Bank’s external auditing firm. The Bond Bank will pursue all available remedies to recover such losses. 

The alleged misappropriation does not affect bond proceeds or bond debt service payments, all of which are maintained by outside Trustee banks and are subject to annual audit and disclosure requirements.

Indianapolis, IN | January 23, 2018
Nora Colomer, The Bond Buyer

Indianapolis officials are asking the City-County Council to approve $55 million of notes to proceed with a criminal justice center project.

It’s the second leg of financing needed for the $571 million project and follows a $20 million draw note approved in July 2017 to finance design work on the planned courthouse, sheriff’s office, jail and assessment and intervention center.

Both the $20 million approved in July and the $55 million in bond anticipation notes are secured by local auction income tax but the borrowing will ultimately be paid off by bond proceeds. The Indianapolis Bond Bank will serve as conduit issuer for the debt on behalf of the council, the legislative body for the combined government of Indianapolis and Marion County.

Indianapolis, IN | January 17, 2018
Hayleigh Colombo, The Indianapolis Business Journal

An Indianapolis City-County Council committee on Tuesday night unanimously approved spending $55 million to pay for a fraction of the construction funding to build the city’s proposed criminal justice center.

The same proposal also authorizes the city to spend $4.2 million for the acquisition of 140 acres of land from Citizens Energy Group as the site for the new jail, courthouses and mental health center. The facilities are being built on the property of the former Citizens coke plant in the Twin Aire neighborhood.

The proposal also indicates the council’s support for the project, which is expected to eventually cost the city $571 million. The full council will have to vote on the $55 million construction funding and land acquisition proposal—as well as future spending on the justice center.

New York, NY | December 13, 2017
Moody's Investors Service

Moody's Investors Service has assigned a 'Aa2' rating to $159.5 million Indianapolis Local Public Improvement Bond Bank Bonds (IN), Series 2017C (PILOT Infrastructure Project). Moody's maintains the Aaa rating on Indianapolis-Marion County (the city), IN's outstanding general obligation (GO) debt.

The Aaa GO rating reflects a diverse economy, improved financial position and moderate pension liabilities. These attributes are balanced against challenges that include weak resident income indices, a restrictive revenue raising environment and high debt levels.

The Aa2 rating on $159.5 million of Refunding Bonds, Series 2017C (PILOT Infrastructure Project) reflects the credit characteristics inherent in the city's GO rating. The MO rating on the current bonds is notched twice from the city's GO rating, reflecting the city's MO pledge to consider appropriating to replenish the debt service reserve (DSR), the risk of non-appropriation, and the more essential nature of the financed assets (wastewater system infrastructure improvements).

The outlook on all ratings is negative. The negative outlook reflects weak resident income indices and a restrictive revenue-raising environment, both of which will challenge the city to grow revenues that keep pace with ongoing cost growth, particularly in the areas of public safety, capital maintenance, debt service, and pensions.

Chicago, IL | October 4, 2017
Moody's Investor Service

Moody's Investors Service affirms the 'Aaa' issuer rating on Indianapolis-Marion County (Indianapolis), IN. The rating reflects a diverse economy; improved financial position; and moderate pension liabilities. These attributes are balanced against challenges that include weak resident income indices; a restrictive revenue-raising environment; and high debt levels.

Concurrently, Moody's affirms the following ratings:

  • The Aaa rating on $82 million of outstanding general obligation limited tax (GOLT) debt. The GOLT pledge is subject to Indiana's (Aaa stable) Circuit Breaker taxing limitations. It is rated on parity with Indianapolis' issuer rating given the ample margin under its rate limitation as well as the city's first budget obligation to levy ad valorem taxes for debt.
  • The Aa1 rating on $515,000 of Certificates of Participation (COPs), Series 2010A and 2010B. The rating is notched once from the issuer rating because the pledge to make lease payments is subject to appropriation and the financed assets (public safety vehicles) are more essential.
  • The Aa2 rating on $160 million of Bond Bank Bonds, Series 2010F (PILOT infrastructure Project - Build America Bonds). The Aa2 rating is notched twice from the issuer rating due to the moral obligation (MO) pledge to consider appropriating to replenish the debt service reserve (DSR) and because the financed assets (wastewater system infrastructure improvements) are more essential.
  • The Aa3 rating on $376 million of MO debt issued for economic development projects. The Aa3 rating is notched three times from the issuer rating due to the MO pledge to consider appropriating to replenish the DSR and because the financed projects are less essential.

The outlook on all ratings is negative.

While the city has made progress in improving its financial profile by reducing expenses, its debt burden and limited flexibility to raise revenues weakly position its issuer rating in the Aaa category. If there is no further improvement in financial or leverage metrics over the next 12 to 24 months, the rating could be pressured.

Dallas, TX | August 1, 2017
Nora Colomer, The Bond Buyer

Marion County and Indianapolis took a first step toward getting a long-anticipated criminal justice facility off the ground with the approval of an initial $20 million in financing.

The City-County Council of Marion County and Indianapolis approved the bond anticipation note issue in a 17 to 7 vote on July 24, providing a strong indicator on how it might vote next year on the 35-year, lease appropriation bonds that will take out the note and cover the entire $571 million of project costs. The Indianapolis Bond Bank will serve as conduit issuer for the debt on behalf of the consolidated council.

Indianapolis, IN | July 24, 2017
James Briggs, The Indianapolis Star

The City-County Council has moved Mayor Joe Hogsett's plan for a new Marion County criminal justice center one big step closer to reality, while also signaling that the project could face increasing scrutiny in the months ahead.

The council on Monday approved the Hogsett administration's request for $20 million to pay for planning and design work for a project that could cost up to $575 million. That money will allow the administration to shepherd the project through the rest of the year, completing engineering, site work, legal work and bidding.

Indianapolis, IN | June 16, 2017
Hayleigh Colombo, The Indianapolis Business Journal

The Indianapolis Bond Bank is looking for firms interested in working on the city’s new criminal justice center—from providing civil engineering services to mechanical, electrical and plumbing work.

The bond bank released a “request for qualifications” on June 9 for 17 design services associated with the project, with submissions due June 27. The city will select chosen contractors sometime after Aug. 1.

The new jail, an assessment and intervention facility, and the courts will be moving to a new complex at the former Citizens Gas and Coke Utility plant just southeast of downtown. The plant closed in 2007.

The new complex is expected to cost upwards of $575 million, and is part of Mayor Joe Hogsett’s overall criminal justice reform efforts.

The RFQ notes that selections are “not based on competitive bidding, but on professional qualifications, competence, documented experience and the expertise of key personnel."

New York, NY | January 18, 2017
Fitch Ratings

Fitch Ratings has assigned a 'AAA' rating to the following Indianapolis Local Public Improvement Bond Bank, IN bonds:

  • $58 million series 2017A bonds (ad valorem property tax-funded projects);
  • $11.99 million series 2017B bonds (taxable) (ad valorem property tax-funded projects).

The Rating Outlook is Stable.

Indianapolis Local Public Improvement Bond Bank Issuance 2017 A & B

Indianapolis, IN | February 1, 2017
The Indianapolis Local Public Improvement Bond Bank

The Indianapolis Bond Bank’s first bond issue of 2017 assisted four Qualified Entities to raise $71.325 million, through Indianapolis Local Public Improvement Bond Bank series 2017A and B. The General Obligation Bonds were issued to finance infrastructure and capital needs for Consolidated City, Park District, Metro Thoroughfare District and Public Safety and Communications District. The Consolidated City used the funds for solid waste equipment, police vehicles, City-County Building generator, voting machines, two firehouses, and fire apparatus. The Park District used its funds for its capital improvement needs. The Metro Thoroughfare District used its proceeds on roads and streets improvements and other major capital equipment. Finally, the Public Safety and Communications District funded a computer-aided dispatch (CAD) system, record management system and E-911 system. Series 2017A and B Bonds were rated AAA by Fitch and AA by Standard & Poor’s.

New York, NY | June 14, 2016
Moody's Investor Services

Moody's Investors Service has assigned a rating of 'A1' to the Indianapolis Local Public Improvement Bond Bank/Indianapolis Airport Authority Refunding Bonds (AMT), Series 2016A-1.

Chicago, IL | May 3, 2016
S&P Global Ratings

S&P Global Ratings has assigned a rating of 'A' to the Indianapolis Local Public Improvement Bond Bank/Indianapolis Airport Authority Refunding Bonds (AMT), Series 2016A. 

The Rating Outlook is Stable.

New York, NY | April 25, 2016
Fitch Ratings

Fitch Ratings has assigned a rating of 'A' to the Indianapolis Local Public Improvement Bond Bank/Indianapolis Airport Authority Refunding Bonds (AMT) Series 2016A-1. 

The Rating Outlook is Stable.

New York, NY | October 30, 2015
Kroll Bond Rating Agency

Kroll Bond Rating Agency, Inc. ("KBRA") has assigned a long-term rating of AA+ with a stable outlook to the City of Indianapolis, General Obligation Bonds. The KBRA long-term rating does not apply to bonds backed by a letter of credit or liquidity facility, unless otherwise noted.

Chicago, IL | August 31, 2015
Moody's Investor Services

Indianapolis, IN’s (Aaa negative) strong credit profile is supported by a fundamentally healthy economy, as evidenced by job growth that has outpaced other Midwest regional hubs. However, escalating operating costs under a somewhat restrictive revenue-raising environment have weighed on the city's finances. The region’s strong economy and a recent influx of cash from the sale of the city’s water and sewer utility will buoy credit quality in the short term, but continued operating budget pressures and elevated leverage pose hurdles in the long term.

Chicago, IL | July 24, 2015
Caitlin Devitt, The Bond Buyer

Indianapolis won a coveted triple-A rating from Standard & Poor's on its stormwater system bonds as the city heads into market with a $15 million borrowing and puts the final touches on a new $300 million capital plan.

The deal will fix out a chunk of stormwater bonds the city privately placed in 2011 that are scheduled to shift into a variable-rate mode in 2020. The city has almost all of its $4.1 billion debt portfolio in a fixed-rate mode, with the exception of some airport debt. The stormwater system is a mix of natural and manmade infrastructure managed by the city's public works department. It's one of the city's last publicly managed utilities, after Indianapolis sold its water and sewer departments to a non-profit in a high-profile privatization in 2011.

Chicago, IL | July 21, 2015
Standard and Poors Rating Services

Standard & Poor's Ratings Services raised its rating on The Indianapolis Local Public Improvement Bond Bank, Ind.'s existing stormwater system senior-lien revenue bonds to 'AAA' from 'AA+'. At the same time, we assigned our 'AAA' rating to the bond bank's series 2015H refunding bonds.

The outlook is stable.​​​​​​​

New York, NY | June 5, 2015
Fitch Ratings

Fitch Ratings assigns an 'AA+' rating to the following Indianapolis Local Public Improvement Bond Bank (Health and Hospital Corp. of Marion County), IN bonds:

  • $16,750,000 refunding bonds, series 2015 B (the bonds).

The bond proceeds will be used to currently refund the bond bank's outstanding series 2005 D bonds for an estimated present value savings of $2.1 million with no extension of the final maturity date of 2025.
In addition, Fitch affirms the following ratings:

  • Approximately $170 million unlimited tax general obligation bonds (ULTGOs), series 2010A-1 and 2010A-2 affirmed at 'AA+';
  • Approximately $19 million general obligation bonds, series 2005D affirmed at 'AA+';
  • Approximately $502 million lease revenue bonds, series 2013A, 2010B-1 and 2010B-2 affirmed at 'AA'.

The Rating Outlook is Stable.

Chicago, IL | June 8, 2015
Standard & Poor's Rating Services

Standard & Poor's Ratings Services raised its rating on the Indianapolis Local Public Improvement Bond Bank, Ind.'s series 2011D, 2011I, and 2012B bonds (senior obligations) to 'AA' from 'AA-'. The outlook is stable. The rating improvement reflects strong revenue performance, which continues to support very strong debt service coverage (DSC).

Indianapolis, IN | May 16, 2015
Jared Council, The Indianapolis Business Journal

Officials who manage the Indianapolis Airport Authority’s $1.1 billion in bond debt typically refinance bonds when they can shave at least 3 percent off total remaining debt payments.

The Indianapolis Local Public Improvement Bond Bank handles what the industry calls bond refundings for entities including the airport, and it recently helped refund a $165 million airport bond to chop total projected debt obligations by about 9 percent.

New York, NY | November 13, 2014
Moody's Corporation

During and in the wake of the US recession, many large local governments in the country have proven just how resilient their credit quality has been to the systemic economic downturn and other challenges such as pension underfunding. In fact, 34 of the 50 largest US cities have either improved or maintained their credit quality since the onset of the Great Recession.

Chicago, IL | January 29, 2015
Fitch Ratings

Fitch Ratings affirms the 'AAA' rating on the following Indianapolis Local Public Improvement Bond Bank, Indiana (the bond bank) bonds: ­­

  • $61.3 million series 2013B taxable refunding bonds;
  • ­­$12 million series 2013C multipurpose refunding bonds; ­­
  • $55.1 million series 2008A ad valorem bonds; ­­$55 million series 2007D multipurpose refunding bonds.

The Rating Outlook is Stable.

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