City of DeKalb, Illinois Rating Update October 27, 2015

Moody’s Investor Rating Surveillance Rating Moody’s confirmed the City’s outstanding “Aa2” rating and put a negative outlook on it The negative outlook is due to higher pension liability based on Moody’s restatement, persistent declines in the equalized assessed valuation and dependence on revenues from the State of Illinois Moody’s will continue to monitor the City The following conditions could make the rating increase: Expansion and diversification of the tax base Continued growth in the City's reserves and liquidity Moderation of the City's debt and pension burdens The following conditions could make the rating decrease: Continued deterioration in the tax base Material declines in the City’s reserves and liquidity Increase in the City's debt or pension burden 1

Rating Categories and Definitions 2

Revised Rating Criteria from Moody’s Debt/Pensions increased from 10% weight factor to 20% 3

Calculation of Moody’s ANPL 4

Moody’s Focus on Pension Liability Moody’s puts greater focus on annual net pension liabilities (ANPL) which they calculate using their own methodology One of the big differences from the PUC methodology is the discount rate on cashflows: 4.6% versus 7.5% Below is Moody’s calculated ANPL for the last several years: ANPL ($000s) 2010: $82,677     2011: $82,417 2012: $117,700   2013: $115,376   2014: $123,120 The then look at this look at this liability divided by annual general fund revenues to come up with a ratio The City’s ratios of general fund revenues to ANPL is 3.6 and they state that the median for Aa2 rated issuers is lower (between 1 and 2) 5

Current Debt Profile 6

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