NEW YORK--(BUSINESS WIRE)--(This is a correction of a release originally issued July 7, 2011. It clarifies that new ratings have been assigned to the district's 2001A&B GO bonds in addition to the affirmation of the outstanding bonds.)
Fitch Ratings assigns an 'AA' rating to the following Cook County Forest Preserve, Illinois' (the district) $19.8 million general obligation (GO) bonds:
--General obligation refunding bonds series 2001A;
--General
obligation limited tax refunding bonds series 2001B;
Fitch
also affirms the 'AA' rating assigned to approximately $82.1 million of
outstanding GO bonds, series 2004.
The Rating Outlook is Stable.
RATING RATIONALE:
--The district's financial profile is strong with
robust reserve levels.
--Fitch remains concerned that the
district's governing structure leaves it open to potential fiscal
pressure from the county.
--The overall debt burden remains
moderate with rapid amortization. However, the district continues to
underfund its pension liability, in accordance with state statute,
leading to a weakening funded ratio which may lead to future financial
pressures from pension costs.
--The area economy is broad and
diverse, anchored by the city of Chicago.
KEY RATING DRIVERS:
--Continued fiscal strength despite potential
outside pressures.
--Separation of the governing board of the
district and county.
--Ability to address retiree obligations given
the increasing Unfunded Actuarial Accrued Liability (UAAL) and severe
underfunding of the annual required contribution (ARC).
SECURITY:
The bonds are direct and general obligations of the
district secured by its full faith and credit. The district has pledged
its ad valorem real property tax revenues without limitation to rate or
amount for the purpose of making debt service payments.
CREDIT SUMMARY:
Established in 1914 for the purpose of land
conservation, the Forest Preserve of Cook County is coterminous with the
county (GO bonds rated 'AA', Stable Outlook by Fitch). The district is a
separate entity from the county with independent taxing powers, although
governed by the county commissioners. Encompassing 68,000 acres,
approximately 11% of the county's land mass, it is authorized to
preserve a total of up 75,000 acres of open land.
The district's service area benefits from a broad and diverse economic base, anchored by the city of Chicago (GO bonds rated 'AA-', Stable Outlook by Fitch), a nationally and globally important business center which serves as headquarters to over 30 Fortune 500 corporations. The unemployment rate has decreased significantly to 9% in April 2011 from 11% a year prior, although the reduction has largely been driven by a 1.5% decrease in the labor force over the same period while actual employment growth was modest. Wealth levels are slightly above average.
Financial operations for the district have been consistently positive for the past four years with increasing reserves. Fiscal 2010 ended with a $3.2 million surplus in the corporate fund bringing the unreserved fund balance to $35.3 million, equal to a robust 72% of spending. In addition, the district has substantial reserves in other funds that could be called upon if necessary, including $13.4 million of unreserved fund balance in the working cash fund (which is used by the district to make temporary loans to other district funds), and over 1 times maximum annual debt service in reserved fund balance in the bond and interest fund. The district expects to end fiscal 2011 roughly flat despite having budgeted a $9.5 million use of reserves, which the district attributes to conservative budgeting. Future projections for the district indicate continued structural balance. No use of fund balance is currently planned, although the district may use a portion for one-time capital needs.
Fitch is concerned that the district's governing structure leaves it vulnerable to potential financial pressure from Cook County, especially given the current fiscal stress of the county and the history of the county lending to the district when it was in a constrained environment. While the district has no plans to lend to the county nor has it been asked to, the decision to do so would be made by the shared Board of Commissioners. A separation of the governing board for the two entities has been under consideration by the Illinois Senate since the time of the last rating, but no decision has been made to date. Fitch believes greater autonomy for the district would be a positive credit factor.
The debt burden, which consists mainly of overlapping, is moderate when measured on a per capita basis and as a percentage of market value. Debt service costs accounted for a high 20% of spending for the combined corporate and bond and interest funds for fiscal 2010, which is not uncommon for a district with a limited and capital intensive service nature. Amortization is rapid with over 75% of principal being retired within the next 10 years. The current fiscal 2011-2015 capital improvement plan totals $83.6 million with no plans for additional debt.
The district funds its pension plan in accordance with state statute, which continues to be well under the actuarially determined contribution. This funding formula, coupled with recent investment losses, have led to a decrease in the funded ratio from 92.4% at the end of fiscal 2008 to 72.8% at the end of fiscal 2010, assuming the district's 7.5% investment return rate. Using Fitch's more conservative 7% investment assumption, the funded ratio declines slightly to a below average 69%. Additionally, the ARC has been increasing significantly over the past few years, from $2.7 million in fiscal 2006 to $7.6 million for the past year. While the district's actual $1.3 million contribution accounted for a moderate 2.7% of spending, funding the full ARC would pressure the district's budget, equaling over 15% of actual fiscal 2010 spending in the corporate fund.
Additional information is available at 'www.fitchratings.com'.
In addition to the sources of information identified in Fitch's Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope and IHS Global Insight.
Applicable Criteria and Related Research:
--'Tax-Supported Rating
Criteria', dated Aug. 16, 2010;
--'U.S. Local Government
Tax-Supported Rating Criteria', dated Oct. 8, 2010.
For information on Build America Bonds, visit 'www.fitchratings.com/BABs'.
Applicable Criteria and Related Research:
Tax-Supported Rating
Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=548605
U.S.
Local Government Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=564566
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