2019-12-30 UST Financial Responsibility Certification

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Summary: South Bend, Indiana; General Obligation; General Obligation Equivalent Security methodology; • Adequate budgetary performance, with a slight operating surplus in the general fund but an operating deficit at the total governmental fund level in fiscal 2016; • Very strong budgetary flexibility, with an available fund balance in fiscal 2016 of 77% of operating expenditures; • Very strong liquidity, with total government available cash at 20.4% of total governmental fund expenditures and 1.8x governmental debt service, and access to external liquidity we consider exceptional; • Adequate debt and contingent liability position, with debt service carrying charges at 11.5% of expenditures and net direct debt that is 108.4% of total governmental fund revenue, as well as rapid amortization, with 68.2% of debt scheduled to be retired in 10 years; and • Strong institutional framework score. Weak economy South Bend, with an estimated population of 100,785, is located in St. Joseph County, in north central Indiana. It is the fourth-largest city in the State of Indiana. South Bend has a substantial health care, manufacturing, and higher education presence. The city is home to several colleges and universities, most notably the University of Notre Dame, which employs more than 6,000 people and has a student body of about 12,300. This presence is a stabilizing factor for the economy, although it suppresses, to an extent, both incomes and market value per capita, in our opinion. South Bend has a projected per capita effective buying income of 67% of the national level and per capita market value of $45,626. The city's economy is growing moderately. Indiana's first, tribal casino, a sizable, entertainment complex, opened its doors in early January 2018. South Bend is focusing its efforts on strategic investments into smaller technology companies; it expects over $200 million in private investments to support 700 new jobs. A former Studebaker assembly plant will be remodeled and converted into a large technology campus over the next 10 years as a part of the large-scale, $160 million project. Notre Dame is working with the city on several partnerships that could bring high-tech jobs. As well, numerous apartment complexes, hotels and residential units are under construction. The local unemployment rate usually exceeds the state and national rates, but the regional economy generally moves in tandem with the broad national economy; it was at 4.5% in 2016. The city's wealth and income levels, however, are persistently below average and continue to slip, likely due to the shortage of high -paying jobs in the area. Therefore, despite ongoing economic development, we anticipate income and market value metrics will remain at levels we consider weak in the near future. Strong management We view the city's management as strong, with good financial policies and practices under our Financial Management Assessment methodology, indicating financial practices exist in most areas, but that governance officials might not formalize or monitor all of them regularly. Officials review several years of historical data when forming the budgets and much of the revenues are certified in advance by the Department of Local Government Finance. South Bend's budgets are forward-looking, comprehensive, and detailed. Long-term financial forecasting and a comprehensive long-term capital improvement plan are integral WWW.STANDARDANDPOORS.COM/RATINGSDIRECT MARCH 13, 2018 3 2005656 1301888078