Chicago Suburb Gets Negative

Standard & Poor’s last week revised its outlook to negative on Berwyn’s general obligation debt as the city faces another budget shortfall and tightened liquidity, the rating agency said as it also affirmed the Chicago suburb’s A-minus rating.

The revision comes as Berwyn prepares to enter the market with $7.6 million in GO debt. Proceeds from the bond issue are expected to relieve some of the fiscal pressures on the city.

Berwyn has faced a deteriorating fiscal position since 2007 but could begin to rebuild its credit through 2009, resulting in a favorable ratings action, Standard & Poor’s analyst Helen Samuelson said in a report on the outlook revision. One of the city’s key strengths is its participation in Chicago’s economy.

Berwyn has a population of 54,000 and reported a $2.9 million general fund deficit in 2007. It’s currently relying on liquidity in funds other than its general fund to meet cash-flow needs, Samuelson said. The city this year implemented some revenue enhancements, such as a property tax increase and vehicle fee as well as up to 12 layoffs. But revenues continue to come in flatter than expected, and management might report a deficit for 2008, warned analysts.

“Given the overall weak financial performance, if the city fails to balance its 2009 budget, or if further financial deterioration occurs, the rating would likely be lowered,” Samuelson said. “However, if the city reports favorable financial results and replenishes reserves and liquidity, it could have positive rating implications.”

Standard & Poor’s is the only credit agency to rate Berwyn’s GO debt.

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