You may have missed this latest news regarding Illinois public pensions: The Village of Oak Lawn has had its credit rating downgraded to “junk” status as of Dec. 23, 2019. The Bond Buyer reports that this recent move now leaves the village open to the state’s garnishment process.
Moody’s Investor Services, one of the “big three” ratings agencies, cut Oak Lawn’s status from Baa1 to Ba1. This is the latest downgrade in a series that may continue to spread throughout other municipalities within the State of Illinois.
Despite the Village’s reduction in debt, low outstanding debt, and strong tax base, the Moody’s report cited the reason for the downgrade is related to “credit risk stemming from public safety pension contributions that are materially below state mandated levels that leave the Village susceptible to diversion of state shared revenue coupled with a weak cash position across its major operating funds.”
The outlook on the $70 million of general obligation unlimited tax bonds was revised to stable from negative with the “expectation that fund balance and liquidity will remain weak but stable over the next two years given recent revenue increases and an absence of any current intentions for the public safety pension boards to request diversion of state share revenue.” The Village plans to slowly improve its cash flow and add revenue including adding a “penny-per-push” tax on video gaming machines expected to make an incremental $500,000 in revenue to help fund public safety pension coffers.
You can read the full report from Moody’s here: https://www.moodys.com/research/Moodys-downgrades-Oak-Lawn-ILs-GO-to-Ba1-outlook-revised–PR_906230077
For more information, if you have a subscription, you can read “Chicago suburb cut to junk over pension woes” at The Bond Buyer: https://www.bondbuyer.com/news/chicago-suburb-cut-to-junk-over-pension-woes
More information can also be found in the Patch: https://patch.com/illinois/oaklawn/pension-woes-sink-oak-lawns-credit-rating-junk-level