2019-12-30 UST Financial Responsibility Certification

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Summary: South Bend, Indiana; General Obligation; General Obligation Equivalent Security 76.6% funded in 2017 (based on Governmental Accounting Standards Board Statements No. 67 and 68). The funded ratio is slightly below the recommended 80% level; however, the assumptions built into the valuations are reasonable. Therefore, we expect pension costs to remain low and manageable in the next few years. The city also sponsors a retiree health care plan, and pays 70% of police and fire member premiums. Civilian employees can buy into the plan, but must cover 100% of premiums. The city uses a pay-as-you-go approach for retiree health care and the annual costs are rather small. Strong institutional framework The institutional framework score for Indiana municipalities is strong. Outlook The stable outlook reflects our view of South Bend's consistently very strong available reserve position and predictable and transparent financial profile supported by strong management practices. The city's robust accumulated reserves and a practice of proactive budget adjustments would allow South Bend to deal with looming revenue losses efficiently, in our opinion. We expect the city's finances to remain stable during our two-year outlook period, therefore we don't expect to raise or lower the rating. Downside scenario If South Bend were to experience budget pressures and its performance starts to deteriorate during our two-year outlook horizon, we could lower the ratings. We could also lower the rating if the city's debt burden increases significantly. Upside scenario We do not expect to raise the rating in the next two years because income levels in South Bend are well below national averages and continue to slip despite the new developments. Beyond then, if incomes and market value per capita improve and all other credit metrics are stable or improve, we could raise the rating. Related Research • 2017 Update Of Institutional Framework For U.S. Local Governments • Incorporating GASB 67 And 68: Evaluating Pension/OPEB Obligations Under Standard & Poor's U.S. Local Government GO Criteria, Sept. 2, 2015 • S&P Public Finance Local GO Criteria: How We Adjust Data For Analytic Consistency, Sept. 12, 2013 • Alternative Financing: Disclosure Is Critical To Credit Analysis In Public Finance, Feb. 18, 2014 South Bend pk dist buds Long Term Rating South Bend pk dist bnds Long Term Rating WWW. STANDARDANDPOORS. COM/ RATINGSDIRECT AA/Stable Affirmed AA/Stable Affirmed MARCH 13, 2018 6 2005656 1301888078