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Summary: <br />South Bend, Indiana; General Obligation; General <br />Obligation Equivalent Security <br />Credit Profile <br />US$5.43 mil GO bnds ser 2018 due 01/15/2038 <br />Long Term Rating AA/Stable New <br />South Bend Bldg Corp, Indiana <br />South Bend, Indiana <br />South Bend Bldg Corp (South Bend) GO <br />Long Term Rating AA/Stable Affirmed <br />Rationale <br />S&P Global Ratings assigned its 'AA' long-term rating to South Bend, Ind.'s $5.43 million general obligation (GO) <br />bonds. At the same time, S&P Global Ratings affirmed its 'AA' rating on existing ad valorem property tax -supported <br />debt issued by and on behalf of the city. The outlook is stable. <br />Securing the bonds are ad valorem property taxes on all taxable property within city limits. South Bend expects to pay <br />debt service from emergency medical service revenues, local income tax revenues, and tax increment finance <br />revenues from the River East Development Area, although these revenue sources are not formally pledged to the <br />bonds. The city will fund a debt service reserve fund that meets the three -prong test requirements with bond proceeds <br />and will use proceeds to build a new fire station and a small training center. <br />The ad valorem property tax pledge is subject to state circuit -breaker legislation, which caps the property tax burden <br />for taxpayers based on a percent of the real estate parcels' gross assessed value. This can, and often does, reduce the <br />total tax levy. The levy to cover debt service, however, is statutorily protected, allowing South Bend to distribute <br />circuit -breaker losses first across nondebt service funds that receive property taxes. We rate this debt at the same level <br />as our view of the city's general creditworthiness.. We affirmed the 'AA' rating on the existing lease rental bonds. The <br />levy of taxes to pay rentals is not subject to annual appropriation under Indiana law. However, lease payments are <br />subject to abatement risk, because the city is required to abate lease rentals in the event the leased property is not <br />available for use. Mitigating abatement risk, in our view, are the lease requiring the city to maintain at least two years <br />of lease interruption insurance and casualty insurance equal to the full replacement cost of the damaged equipment. <br />There is no construction risk, because the project is complete and occupied. <br />The 'AA' ratings further reflect the following rating factors for the city: <br />• Weak economy, with projected per capita effective buying income at 67.0% and market value per capita of $45,626, <br />though that is advantageously gaining from a local stabilizing institutional influence; <br />• Strong management, with good financial policies and practices under our Financial Management Assessment <br />WWW.STANDARDANDPOORS.COM/RATINGSDIRECT MARCH 13, 2018 2 <br />2005656 1301888078 <br />