Press Release|Public Finance
KBRA Assigns A Rating to the City of Detroit Downtown Development Authority Tax Increment Revenue Refunding Bonds, Series 2024 (Catalyst Development Project)
6 Jun 2024 | New York
KBRA assigns the 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 places 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 the planned financing.
Key Credit Considerations
The rating was assigned because of the following key credit considerations:
Credit Positives
- FY 2023 Pledged Revenues provide pro forma 4.25x MADS coverage.
- No additional parity bonds are permitted, with the exception of refunding bonds for savings.
- Established growth trend in Pledged Revenues.
- Plans for further substantial private investment within the District boundaries that, despite not directly increasing Pledged Revenues, will further support taxable property valuation.
Credit Challenges
- Despite an overall improving trend and an ongoing rebound as the pandemic wanes, the Detroit economy remains fragile, and if a substantial economic decline occurs in the near future, before the taxable property values have a chance to further stabilize, then debt service coverage ratios could weaken.
- Potential for assessment reductions due to lower office space demand resulting from hybrid working arrangements.
Rating Sensitivities
For Upgrade
- Significant development and diversification in the District that is reflected in Pledged Revenue increases and higher debt service coverage.
For Downgrade
- Declining property values, reduced investments, or other economic factors that weaken the available Pledged Revenues in the District further than current stress scenarios.
- Any change to the City’s or Wayne County’s tax practices that erodes DDA’s current insulation from historically weak county-wide property tax collections.
- Any actions by the City, State, County, or other taxing entities to reduce tax rates, reduce taxable property value, or in any other way weaken the Pledged Revenues.
To access rating and relevant documents, click here.