KBRA has assigned a 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 has placed 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 planned financing.
Key Credit Considerations
The rating reflects the following key credit considerations:
Credit Positives:
- FY 2023 Pledged Revenues provide pro forma 4.25x MADS coverage.
- Restriction on additional parity bonds, except for refunding bonds aimed at achieving savings.
- Established growth trend in Pledged Revenues.
- Plans for substantial private investment within District boundaries, bolstering taxable property valuation despite not directly increasing Pledged Revenues.
Credit Challenges:
- Fragility of Detroit’s economy despite ongoing post-pandemic recovery.
- Potential weakening of debt service coverage ratios in the event of significant economic downturn before stabilization of taxable property values.
- Risk of assessment reductions due to reduced demand for office space from hybrid work arrangements.
Rating Sensitivities:
For Upgrade:
- Significant development and diversification in the District leading to increased Pledged Revenue and higher debt service coverage.
For Downgrade:
- Decline in property values or reduced investments adversely affecting Pledged Revenues beyond current stress scenarios.
- Changes in tax practices by City, State, County, or other entities weakening Pledged Revenues.
- Actions impacting DDA’s insulation from historically weak county-wide property tax collections.
For access to ratings and related documents, click here.
Methodologies:
- Public Finance: General Property Tax/Assessment Revenue Methodology
- ESG Global Rating Methodology
Disclosures:
- Information Disclosure Forms detail sources and methodologies used in credit rating determination.
- Rating category explanations available here.
- Further disclosures on this rating action provided in referenced Information Disclosure Forms.
For more information on KBRA policies, methodologies, rating scales, and disclosures, visit www.kbra.com.
