1. City of DeKalb, Illinois
Rating Update
July 24, 2017

2. Moody’s Investor Rating Surveillance Rating
Moody’s downgraded the City’s previous “Aa3” rating to “A1”
This is a significant drop because it puts takes the City from the Aa category to the single A category
The rating downgrade is due to higher pension liability based on Moody’s restatement, 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
Moderation of the City's unfunded pension liability
The following conditions could make the rating decrease:
Deterioration in the tax base
Material declines in the City’s reserves and liquidity
Increase in the City's unfunded pension liability
Moody’s was complementary regarding Financial Operations and Reserves: “Solid Reserves and Improving Financial Position”

3. City of DeKalb Rating History

4. Rating Categories and Definitions
Grade
Moody's
Standard & Poor's
Description
Aaa
AAA
Extremely strong capacity ot meet financial obligations
Aa1 AA+
Aa2 AA
Very strong capacity to meet obligations
Investment
Aa3
AA- A1
City of DeKalb A+ A2 A
Strong capacity but susceptible to adversity A3 A-
Baa1 BBB+
Baa2
BBB
Adequate financial capacity but adverse conditions will
Baa3
State of Illinois
BBB-
lead to weakness
Ba1
City of Chicago
BB+
Ba2 BB
Non-Investment Grade Speculative
Non-Investment
Ba3
BB- B1 B+ B2 B
Highly Speculative
B3 B-
Caa
CCC+ Ca
CCC
Extremely speculative C
CCC-

5. Calculation of Moody’s ANPL
Adjusted Net Pension Liability (ANPL) = Adjusted Liabilities (AAL) - Plan Assets (AVA)
AAL Adjustment
Fire
Police
IMRF
Total
AAL (000s)
62,792
60,898
54,653
178,343
Assumed investment rate of return
7.46%
Citibank Pension Liability Index (as of valuation date)
4.34%
AAL Projected Forward 13 years at 7.5% (000s)
159,997
155,171
139,259
454,428
Discounted at Citibank Pension (000s)
92,098
89,320
80,161
261,580
Liability Rate Above
Less: Actuarial Value of Plan Assets (000s)
23,471
28,699
44,692
96,862
ANPL (000s)
68,627
60,621
35,469
164,718
Operating Fund Revenues (000s)
33,544
ANPL/GF Revenues
4.91

6. Moody’s Focus on Pension Liability
Moody’s puts greater focus on annual net pension liabilities (ANPL) which they calculate using their own methodology
The City changed from the Project Unit Cost (PUC) methodology to the more convervative Age Entry Normal method on the actuarial calculation, which is viewed positively by Moody’s however it increases the pension liability
In addition, the City uses a 7.46% discount rate on future cashflows resulting in an AAL of
$178,343 (000) versus Moody’s who uses a 4.34% discount rate resulting in a $261,580(000) AAL
Moody’s looks 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 4.9 and they state that the median for Aa rated issuers is lower (between 1 and 2)

7. S&P Rating Estimator Overall Estimate

8. Notice and Disclaimer William Blair & Company 222 West Adams
The accompanying information was obtained from sources which William Blair
& Company, L.L.C. believes to be reliable but does not guarantee its accuracy and completeness.
The material has been prepared solely for informational purposes and is not a solicitation of an offer to buy or sell any security or instrument or to participate in any trading strategy.
Historical data is not an indication of future results.
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William Blair & Company 222 West Adams
Chicago, Illinois