Kevin Bain,
Director of Strategy
About City of Detroit Investor Relations
Welcome to the investor relations page of the City of Detroit. This site includes information on bonds issued by the City, which are managed by the Office of the Treasury, within the Office of the Chief Financial Officer. The Office of the Treasury provides oversight and enforcement of the City’s debt management and investment policies and procedures which includes policy and planning, debt issuance, monitoring (including investment), and compliance.
For further information, please do not hesitate to reach out to our office:
City of Detroit
Office of the Chief Financial Officer
Office of the Treasury
2 Woodward Avenue - Suite 1200
Detroit, MI 48226
(313) 224-1219
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View Program DetailsDetroit, MI – The City of Detroit’s first bond sale under its new investment grade status was a huge success, generating strong investor demand and attracting 13 bidders. The issuance on Tuesday also marked the first deal post bankruptcy for the City using a competitive sale method, which is when bonds are awarded to the bidder that submits the lowest true interest cost bid. The City’s successful sale of $46.3 million in Unlimited Tax General Obligation (UTGO) bonds underscore confidence in Detroit's financial recovery and investment prospects.
The bond issued represents the remaining voter-approved UTGO bonds which consisted of $22.0 million for Public Lighting, $11.6 million for Transportation, $9.0 million for Recreation, and $3.7 million for Public Safety and Economic Development. Wells Fargo Bank, National Association who submitted the lowest True Interest Cost bid for the bonds received the award.
The bond sale success is a result of Detroit’s improving credit rating profile. The improved rating combined with the competitive sale method allowed the City to completely reset its credit spreads at significantly tighter levels with its 10-year bonds selling more than 100 basis points (1 full percentage point equals 100) tighter than the results of the City’s 2023 UTGO bonds that priced almost exactly a year ago. The lower credit spreads translate to lower borrowing costs and will save the City over $4 million in debt service on these bonds.
"Today marks another milestone for the City of Detroit as we successfully completed our first competitive bond issuance. This achievement highlights our commitment to fiscal responsibility and prudent financial management; seeking ways to benefit Detroit residents at the lowest possible cost The proceeds from this issuance will be instrumental in advancing key infrastructure projects and supporting essential services that enhance the quality of life for our residents. We are grateful for the confidence shown by investors, reflecting our continued progress and positive economic trajectory,” said, CFO Jay Rising.
The issuance remains aligned with the Mayor’s announcement of lowering the debt millage from 8 mills to 7 mills in 2024 and plans for an additional reduction to 6 mills in 2025.
Leveraging Detroit’s fresh investment grade rating
Earlier in 2024 the City of Detroit received rare double-double notch upgrades when Moody’s raised its rating from Ba1 to Baa2 on positive outlook in March and S&P followed with an upgrade from BB+ to BBB. These ratings returned Detroit to investment grade status for the first time since 2009 and marked an incredible financial turnaround from bankruptcy in less than ten years.
Capitalizing on the strong rating news, the City decided to sell its 2024 bond issuance through a competitive sale process. The City is very pleased by the number of bids received through the competitive sale process and the significant tightening of credit spreads that resulted in further reducing costs and creating savings for Detroit taxpayers.
A key measure of success for the bond transaction is the final credit spread on the bonds: lower credit spreads mean lower interest rates and a better deal for the City. Detroit’s rating upgrade was likely the most important factor generating strong investor demand for the 2024 Bonds and delivered the best credit spreads in recent history. The credit spreads ranged from 36-76 basis points (bps) and were 70 bps on the 10-year maturity. By comparison, the 2023 transaction had spreads of 138 to 178 basis points with a spread of 178 bps on the 10-year. The City’s 2021 bond deal had previously been the City’s lowest credit spreads thanks to a particularly strong market. Even in 2021, the spread on the 10-year was 55 bps higher than the current sale at 125 bps.
Christine Fay, Senior Manager Director at Public Resources Advisory Group, Inc, also added “rates received reflect not only the City’s improved credit ratings but also recognition of the City’s improved economic progress and trajectory,” said Fay.
Residents are the true winners today as the bond sales will allow the City to invest in key areas that improve the quality of life for Detroiters including investments in public lighting, transportation, public safety, recreation and economic development.
Detroit, MI – In ten years, Detroit has completed a remarkable financial turnaround on the journey from junk bond status to investment grade after receiving a double-notch rating increase from Standard and Poor’s Global Ratings on today, less than a month after Moody’s double-notch upgrade.
S&P has raised Detroit’s General Obligation (GO) debt to a BBB rating, noting the City’s strong fiscal management, positive financial results and improvements to reserves and liquidity. At the same time, S&P upgraded its rating on Detroit’s Public Lighting Authority and Income Tax backed debt issued through the Michigan Finance Authority (considered Priority-Lien debt because of their pledge of specific tax revenues) to A- from BBB.
S&P wrote: “Ten years on from its bankruptcy filing, Detroit's financial position and economic condition are the strongest they've been in decades. Liquidity and reserves are at record levels, the debt burden is manageable, population decline is flattening, the stock of blighted and vacant properties is down considerably thanks to extensive city-managed programs, assessed property values have increased in five consecutive years [...], and taxable wages continue to grow.”
Mayor Duggan again praised the City’s Chief Financial Officers over the last decade: John Hill, Dave Massaron, Jay Rising, as well as Chief Deputy CFOs Tanya Stoudemire and John Naglick. The double-notch upgrade from both rating agencies stems from the hard choices, discipline and sound financial management they’ve made over the years,” Duggan said. “No one in 2014 would have predicted Detroit returning to investment grade with both rating agencies in less than a decade.”
Double-Double: Two notch increases from two rating agencies
S&P’s credit action follows an equivalent rating upgrade to Baa2 from Ba1 issued by Moody’s last month. Neither agency has rated Detroit investment grade since the beginning of 2009, and the back-to-back announcements highlight the incredible progress since the City exited bankruptcy just under 10 years ago.
They noted “In our view, concerted management action and institutional support to not only recover from bankruptcy, but also to revitalize Detroit’s economy and finances, enabled the city to capitalize on its situation.”
S&P also remarked that, “The rating action reflects Detroit’s strengthened financial position and our increased confidence in the city’s ability to sustain balance within the construct of its latest pension funding framework. Despite the pressures it faces, we feel the city is now well positioned to sustain a financial profile supportive of the ‘BBB’ rating given significant flexibility in the form of operating reserves, the Retiree Protection Fund (RPF), and stimulus funds, as well as a commitment to maintaining balanced operations. A very active management team with disciplined planning and budget oversight, a robust pipeline of ongoing economic development, and what we consider an achievable pension funding strategy further support the rating.”
Marked return to structural balance
Importantly, S&P notes that they have removed their “structural imbalance” adjustment, which depressed and limited Detroit’s rating. S&P has considered the City structurally imbalanced for years due to the pending fiscal cliff from paused legacy pension payments.
Now with the City poised to comfortably resume legacy pension payments with support from the RPF, S&P reports, “We feel the path ahead is well-defined and that the city can likely remain in line with the funding plan, so we removed our consideration of this [structural imbalance] adjustment.”
Moreover, S&P views the City’s acceleration of pension payments by switching from a level dollar to a level principal amortization as a credit positive: “Detroit shifted its pension funding policy this year, to a level principal amortization, instead of level dollar, which will result in higher contributions in the near-to-medium term. These will be funded with increased draws on the RPF and do not alter expected payments from the operating budget. We do not view the higher draws on the RPF, compared to previous expectations, as an indication of increased budget pressure, rather, this approach should reduce long-term risks by better funding the pension plans sooner, while still preserving flexibility with the RPF. We also view this as a reflection of an improved financial position, whereby the city can take on more volatility risks from higher contributions to increase long-term stability of the plan.”
Overcoming doubts of Detroit’s resilience
Prior to exiting Bankruptcy, a Plan of Adjustment (POA) was agreed upon that would put the City on track to restore basic services, though many doubted whether anything beyond “adequate” could be achieved. A feasibility study of the POA stated, “I do not need to envision that Detroit will become a best in class municipality to determine that the POA is feasible. For Detroit, emerging from essential services failure to adequate and reasonable service delivery will be a success.”
However, the City has exceeded every major expectation of the Plan of Adjustment:
Detroit Chief Financial Officer, Jay Rising noted:
“It is a remarkable testament to the City’s efforts that both Moody’s and S&P now rate Detroit as an investment grade credit, made even more significant by the ‘double’-double-notch upgrades. This historic accomplishment belongs not only to the City’s leaders –the mayor, his staff and, City Council but to all the residents, businesses, philanthropic partners and other organizations who kept their faith and investment in Detroit. Most importantly, these upgrades are a validation that residents can be assured that their City is fiscally stable and able to preserve and maintain city services.”
Detroit, MI -- The City of Detroit has capped off a remarkable financial turnaround, going from the nation’s largest municipal bankruptcy in 2014 to achieving investment grade status in just 10 years, Mayor Mike Duggan said today. The comments come after Moody’s Investors Services on Friday gave Detroit a rare two-notch bond rating increase from Ba1 to Baa2 with a positive outlook.
The new rating returns Detroit to investment grade status for the first time since 2009. In a report issued Friday March 22, 2024 Moody’s praised Detroit’s strong financial performance over the last decade as a key reason for the growing confidence:
“The upgrade of the issuer and GOULT ratings to Baa2 reflects Moody's expectation that the city will continue to bolster its financial resiliency and maintain the track record of solid operating performance that has been seen over the past several years.”
“Despite those credit pressures, Detroit's tax base valuation doubled over the past five years and ongoing development and appreciation of residential values will provide another boost in fiscal 2025.”
“The city's financial ratios are robust after a decade of solid financial performance. City management has adhered to strong governance practices and Moody's expectation is that such momentum will continue.”
Mayor Duggan gave special praise to the City’s Chief Financial Officers over the last decade: John Hill, Dave Massaron, Jay Rising, as well as Deputy CFOs Tanya Stoudemire and John Naglick. “It has been 10 years of hard choices and sound financial management by these great leaders,” Duggan said. “No one in 2014 would have predicted Detroit returning to investment grade in less than a decade.
Since the City’s bond rating was dropped to an all-time low of Caa3 in June 2013, it has earned 10 step increases, a rise few would have expected following its exit from bankruptcy less than a decade ago. Even a single-step increase to Baa3 would have brought Detroit back to investment grade.
“Even more encouraging is Moody’s rating of Detroit’s outlook for the future as positive,” Jay Rising said. “That is a strong indication that if we stay on track, Detroit could well see another upgrade in 2025.”
Mayor Duggan also credited a decade of sound budget decisions by Detroit City Council as a major contributor to Detroit’s success. “In 2014, all the analysts were predicting a financial crisis in 2023 when Detroit hit the “pension cliff” and had to start making $150 million a year in payments to the pension fund. City Council’s strong support to establish a $479 million Retiree Protection Fund over the last decade was key to our current success.”
Detroit’s double-notch upgrade also is the City’s first multi-notch upgrade since Moody’s adopted its current rating scale. The rating maintains the City’s positive outlook, citing resilience, solid financial performance and improving tax base as reasons to expect a continued upward trajectory.
Investment Grade status opens Detroit to new markets
This third consecutive year of upgrades from Moody’s is the most consequential. Many large investors (such as pension funds, mutual funds, and insurance companies) that purchase municipal bonds will only purchase investment-grade bonds. Breaking the barrier into investment-grade opens the City's bonds to a much wider market, in turn lowering interest rates. Lower borrowing rates also allow the City to reprioritize taxpayer money that would have otherwise been allocated towards paying interest. It also allows for greater investment in critical areas like infrastructure improvements, neighborhood revitalization, and public services.
Overcoming Doubts of Detroit’s Resilience
Prior to exiting Bankruptcy, a Plan of Adjustment (POA) was agreed upon that would put the City on track to restore basic services, though many doubted whether anything beyond “adequate” could be achieved. A feasibility study of the POA stated, “I do not need to envision that Detroit will become a best in class municipality to determine that the POA is feasible. For Detroit, emerging from essential services failure to adequate and reasonable service delivery will be a success.”
However, the City has exceeded every major expectation of the Plan of Adjustment:
From Bankruptcy to Investment Grade
The improved bond rating is indicative of the City’s improving economy and tax base, according to the Moody’s report: “Detroit’s economy has markedly improved in recent years and will continue to recover given preliminary tax base growth, improved services, reduced blight and a pipeline of development projects, including major investments in new downtown hotels, retail, condos and apartments.”
Moody’s further noted, “Despite credit pressures, Detroit’s tax base valuation doubled over the past five years and ongoing development and appreciation of residential values will provide another boost in fiscal 2025. The city’s financial ratios are robust after a decade of solid financial performance. City management has adhered to strong governance practices and Moody’s expectation is that such momentum will continue."
Jay Rising thanked all the Detroit staff who worked so hard over the last decade: “This achievement reflects the dedication and hard work of countless individuals. Our team, alongside leaders across all departments, have been instrumental in driving this positive change. We are committed to maintaining this fiscal responsibility for the benefit of all Detroiters."
Moody’s also acknowledged fiscal management as key areas of strength which place Detroit on par with even higher rated cities in the single-A and above categories. “Detroit's available fund balance ratio will likely remain around 35%, which is the Aaa-scorecard threshold, because moderate revenue growth will offset rising expenditure pressures. Additionally, the city's budget management practices – including a sophisticated revenue-setting process – will provide it with tools to respond to possible adverse developments, such as an economic downturn."
In previous years, Moody’s stated that Detroit needed to demonstrate structural balance. For the past decade, the pending pension cliff had impacted Detroit’s credit rating. To address that risk and protect retiree pension funding, in 2017 the City established and began building reserves in the Retiree Protection Fund (RPF). The RPF balance reached $479 million in assets as of December 2023.
The City will draw on the RPF to offset pension payments beginning this year, successfully easing the “cliff” into a manageable ramp and clearly demonstrating structural balance. Moody’s confirmed the importance of this commitment in commenting that: “The city has modest future debt plans and it has resumed its actuarially determined pension contributions with little challenge.”
Momentum Likely to Continue
Moody’s commended the City’s strong leadership in financial management, citing a solid track record of balanced budgets and general fund operations since the bankruptcy exit in November 2014: “Projected fiscal 2024 general fund revenues are up roughly $73 million compared to the adopted budget, based on year-to-date performance. The city plans to redirect that money back into services such as blight remediation, capital and public safety, and will end with roughly balanced operations.”
The positive outlook assigned with the credit rating is due to an increasing tax base and revenue growth. The City could experience a future upgrade if these trends continue, along with its strong management practices and continued maintenance of its fund balance and long-term liabilities.
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