Moody's strikes again, lowering Cook County debt a notch
Friday, June 05, 2015
Crain's Chicago Business
by Greg Hinz
Pension woes further ensnared local government today as a major credit rating agency, Moody's Investors Service, lowered its view of Cook County debt another notch but kept it above the junk level the city of Chicago has achieved.
The New York firm downgraded to A2 from A1 the rating on $3.6 billion in county general-obligation debt. Though that's notches better than Chicago's current Ba1 rating, Moody's cautioned today that the outlook on Cook County debt remains negative, with a strong possibility of a further downgrade to come.
Moody's blamed the action mostly on pensions, specifically citing an Illinois Supreme Court ruling in May that overturned state pension reform and emphasizing that County President Toni Preckwinkle has been unable to win General Assembly approval of her proposed pension fix.
"We expect pension-related costs will place increasing strain on the county's financial operations," Moody's said. The county shares much of its tax base with Chicago and Chicago Public Schools, it added. "We believe that the revenue demands of these entities cold place practical limitations on the county's ability and willingness to increase revenue to fund its pension costs."
Another negative is "enterprise risks inherent" in operating a large network of hospitals and health clinics.
Preckwinkle's office had no immediate reaction.
Meanwhile, somewhat better news has been received by another local unit: the Chicago Park District.
Kroll Bond Rating Agency, a smaller and newer firm than Moody's, said in a statement that it is keeping its AA rating on Park District debt, which Moody's deems below investment grade.
"KBRA considers the district's financial condition to be strong based on a history of generally positive operating results," it said in a statement. "The district's track record of managing expenditures and trimming personnel costs reflect the district's conservative budgeting and fiscal monitoring practices as well as a willingness to make necessary budget adjustments."
Despite the recent Moody's downgrade, the district has no variable rate debt or exposure to swap derivatives and has a $40 million line of credit, it added.
Update, 1:20 p.m. — Preckwinkle's office has a response. From a statement:
"We disagree with Moody's decision today and their tying the fiscal issues of other governmental bodies to Cook County's current financial condition. While we dispute the downgrade, we do find common ground with Moody's on the need for meaningful Cook County pension reform. . . .The Cook County pension system debt is increasing by $30 million every month. We will continue working with Gov. (Bruce) Rauner, the General Assembly and the Cook County Board of Commissioners through the summer to pass meaningful pension reform."