Rating Action: Moody's downgrades Cook County Forest Preserve District, IL's GO to A2 from A1; outlook negative
Monday, June 08, 2015
Moody's Investor Service
A2 rating applies to $200M of GO debt
New York, June 08, 2015 -- Moody's Investors Service has downgraded to A2 from A1 the rating on the Cook County Forest Preserve District, IL's general obligation (GO) debt. The district has $200 million in GO debt outstanding, $146.1 million of which is secured by the district's general obligation unlimited tax (GOULT) pledge and $53.9 million of which is secured by the district's general obligation limited tax (GOLT) pledge. The outlook remains negative.
SUMMARY RATING RATIONALE
The A2 rating on the district's GOULT debt reflects the district's growing pension liabilities, which are a consequence of statutorily-mandated contribution levels that are not based on actuarial standards of the Forest Preserve District Employees' Annuity and Benefit Fund of Cook County. The district's credit profile is also pressured by competing demands placed on the local property tax base from the debt and unfunded pension liabilities of Cook County (A2 negative), which is coterminous with the district, as well as the City of Chicago (Ba1 negative) and the Chicago Public Schools (CPS) (Ba3 negative), which represent half of the district's tax base. Finally, the district's governance ties to the county inform our credit opinion. The same group of people who serve on the Board of Commissioners of Cook County also serve on the Board of Commissioners of the Forest Preserve District of Cook County.
The A2 rating on the district's GOLT debt reflects the credit characteristics inherent in the A2 rating on the district's GOULT debt as well as ample debt service coverage provided by the district's debt service extension base (DSEB), which secures the district's GOLT debt. The DSEB levy is unlimited by rate but is limited by the amount of the district's DSEB, which provides ample coverage of the district's DSEB-secured debt.
The negative outlook reflects the district's governance ties to Cook County, the GO rating of which carries a negative outlook.
WHAT COULD CHANGE THE RATING UP (or revise the outlook to stable)
- Improvement in Cook County's credit profile that strengthens the district's credit quality given the two entities' governance ties and coterminous tax base
- A composition of the district's board that differs from that of the county's
WHAT COULD MAKE THE RATING GO DOWN
- Declines in Cook County's credit profile that weakens the district's credit quality given the two entities' governance ties and coterminous tax base
- Continued growth in unfunded pension liabilities
- Substantial reduction in the district's reserves or liquidity
The Cook County Forest Preserve District is organized under the Downstate Forest Preserve Act of the State of Illinois. The district is a statutorily-created separate unit of government that has an independent budget and its own property tax levying authority. The district is a discretely-presented component unit of Cook County. The district's board is comprised of the same individuals who serve on the county's board. The district's board president is also the county's board president.
The district's tax base is coterminous with that of Cook County. The district manages 69,000 acres (approximately 11% of Cook County's land area). The district provides for the protection of watershed and flood plain areas; expanding existing forest preserves; connecting land holdings; and developing or enhancing cultural, recreational and educational resources.
Debt service on the Cook County Forest Preserve District's GOULT bonds is secured by the district's pledge to levy a tax unlimited as to rate and amount. Debt service on the district's GOLT bonds is secured by the district's pledge to levy a tax unlimited as to rate but limited by the amount of the district's DSEB.
USE OF PROCEEDS
The principal methodology used in this rating was US Local Government General Obligation Debt published in January 2014. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.
For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
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Mark G. Lazarus
Asst Vice President - Analyst
Public Finance Group
Moody's Investors Service, Inc.
100 N Riverside Plaza
Chicago, IL 60606
Vice President - Senior Analyst
Public Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007