CHICAGO – On the heels of a negative outlook revision from Fitch Ratings, Cook County, Ill. intends not to ask the agency to rate its next debt issue, according to documents authorizing an upcoming general obligation borrowing.
The move by Cook to drop the rating agency follows Fitch’s July decision to revise the county’s outlook to negative from stable on $3 billion of outstanding general obligation debt due to fiscal pressures. The outlook revision came ahead of the county’s issue of $150 million of tax anticipation notes.
At the time the outlook revision prompted warnings from the county that it would drop Fitch in the future, according to sources.
Fitch affirmed its AA rating on the county’s outstanding debt. “We can’t force anyone to hire us and it is purely their decision to do so or not,” said Fitch analyst Melanie Shaker. “Fitch stands by its rating action and outlook change on the county.”
County officials were not available for immediate comment. Fitch has rated Cook since 1996.
The county finance committee next Wednesday is set to consider the ordinance authorizing the GO borrowing. It is still uncertain how much the county would borrow, but sources said it could be up to $800 million, some of which would cover pension payments owed in fiscal 2007.
The ordinance authorizing county Chief Financial Officer Donna Dunning to sell the bonds seems to indicate that the county will not use Fitch as a rating agency, as only Standard & Poor’s and Moody’s Investors Service are listed as ratings agencies. The exclusion confirmed earlier predictions that the county would drop the agency on its upcoming issue, according to sources.
The bond ordinance has drawn the ire of at least one commissioner, who is expected to raise a number of objections at the finance meeting next week.
The county earlier this year implemented a controversial 1% sales tax increase that pushed Chicago’s sales tax to 10.25% — the highest in the nation. At the time Fitch said the sales tax hike introduced some new short- and long-term risks for the county as well as Chicago and the surrounding suburbs, and that the county’s 2007 revenue expectations from cigarette taxes and patient collections also proved too optimistic.
“We certainly indicated to the county prior to our ratings outlook that we had serious concerns about the credit,” Shaker said.
Moody’s affirmed its Aa2 and stable outlook and Standard & Poor’s affirmed its AA with a stable outlook.
