Imlay City, MI 2019 GO Bonds Assigned 'A+' Rating

CHICAGO (S&P Global Ratings) March 13, 2019--S&P Global Ratings assigned its 
'A+' long-term rating to Imlay City, Mich.'s series 2019 unlimited-tax general 
obligation (GO) bonds. The outlook is stable. 

The series 2019 bonds were approved by voters, and are secured by the city's 
unlimited-tax full faith and credit pledge. Management intends to use bond 
proceeds to finance construction of a new fire station. 

"The rating reflects our view of Imlay's projected effective buying income at 
65% of national levels, adequate management, strong budgetary performance, 
very strong flexibility, but a very weak debt and contingent liability 
position," said S&P Global Ratings credit analyst John Sauter.

Imlay City is a smaller, mostly residential community with a stable local 
economy, but incomes are low, population has declined slightly, and there is 
modest concentration and reliance on one large (though stable) employer and 
taxpayer, Vlasic. The concentration is more significant when factoring in the 
smaller nominal size of the operating budget. At the same time, the city's 
financial operations remain strong, with consistently balanced budgetary 
performance and reserves that have grown to over a full year's expenditures. 
The city has strong budget monitoring practices, which we feel help support 
the strong performance. The very strong reserves also offer good flexibility 
to address rising costs and unexpected events. The debt burden is high, 
relative to the budget, and there is a large unfunded pension obligation that 
has potential to cause pressure. Management has been taking steps to better 
fund the pension plan, though, which should reduce the pace of escalating 
costs. Should the city's economy continue to grow, in unison with ongoing 
maintenance of very strong reserves at current levels and an improving pension 
funded position, we could raise the rating.

"The stable outlook reflects our expectation that Imlay City will maintain 
balanced year-to-year budgetary performance and therefore maintain its very 
strong reserve and liquidity position," added Mr. Sauter. The city's stable 
and consistent revenue performance, notably with property taxes, as well as 
good budget monitoring, support this expectation. We feel the very strong 
reserve position affords the city flexibility to address potential increasing 
expenditures or other unexpected events. Though the debt will increase with 
the series 2019 bonds, we do not anticipate the debt profile growing further. 
As a result, we do not anticipate changing the rating within the two-year 
outlook period.