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3/52015 Fitch Ratings I Press Release As is typical in Indiana, due to stringent restrictions on the issuance of general obligation debt,the city relies upon the use of lease rental revenue bonds payable from ad valorem taxes. The obligation to pay is not subject to appropriation, but is subjectto abatement in case of damage or destruction of the leased premises. The requirementto maintain property and casualty insurance, along with rental interruption insurance sufficient to cover two years of abated rental payments, mitigates the abatement risk. The College Football Hall of Fame,for which the series 2011A bonds were issued,vacated its building in South Bend at the end of 2012 and moved to Atlanta. The city is currently in conversations with private entities interested in redeveloping the space for commercial use. It is also being vetted for a potential civic use. Fitch believes there is minimal risk of lease payments not continuing as there is no appropriation risk,a special property tax levy is used to pay debt service without tapping into general fund revenue or local option income tax revenue. The last lease rental payment is Feb. 1, 2018, at which time the city owns the facility outright. The majority of city employees participate in the Public Employees Retirement Fund (PERF), an agent multiple- employer defined benefit plan, administered by the state. The city continues to fund its statutory annual required contribution as mandated by the state. Based on a 7% rate of return, Fitch-estimated city's local portion has a weak funded ratio of 55%. In addition to PERF, the city has two single employer defined benefit plans for police and fire fighters hired prior to 1977. Indiana statute requires funding only the next year's budgeted expenditure,these plans have been funded on a pay-as-you-go-basis and therefore have very low funding ratio of approximately 3%. As a result of property tax reform, in 2009 the state assumed the funding of the two plans. The combined UAAL for these plans is$141.2 million. Fitch does not expectthe city to be responsible for this liability but recognizes as a risk the possibility thatthe state could change the law again. In that case,this sizable liability-2.9% of full value, could revert to the city. The city addresses its other post-employment benefits(OPEB)costs on a pay-as-you-go basis and has no plans to pre-fund the liability. The unfunded liability was$21.5 million, or a modest 0.4% of taxable market value as of Jan. 1, 2013. Overall debt service, pension, and OPEB costs are manageable at 17.8% of total 2013 governmental fund expenditures. Contact: Primary Analyst Karen Wagner Director +1-212-908-0230 Fitch Ratings, Inc. 33 Whitehall Street New York, NY 10004 Secondary Analyst Christina Lin Analyst +1-212-908-0548 Committee Chairperson Amy Laskey Managing Director +1-212-908-0568 Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: elizabeth.fogerty@fitchratings.com. In addition to the sources of information identified in Fitch's Tax-Supported Rating Criteria,this action was additionally informed by information from Creditscope, S&P/Case-Shiller Home Price Index, IHS Global Insight and, National Association of Realtors. Applicable Criteria and Related Research. —'Tax-Supported Rating Criteria' (Aug. 14, 2012), —'U.S. Local Government Tax-Supported Rating Criteria' (Aug. 14, 2012). hH ps://www.fitchratings.com/creditdesk/press_releases/detail.cfm?print=1&pr_id=980802 3/4