Cook Co. CHSD 229, Ill., Cut to Aa3 by Moody's

Moody's Investors Service said it has downgraded Cook County CHSD 229 (Oak Lawn), Illinois' rating to Aa3 from Aa2.

Concurrently, Moody's assigns a Aa3 rating to the district's $995,000 general obligation limited tax school bonds, Series 2012A and $7.4 million general obligation limited tax school bonds, Series 2012B.

The downgrade of the district's rating to Aa3 is based on ongoing operating deficits in the district's education and operations and maintenance (O&M) funds resulting in a weaker liquidity position and a significant decline in equalized assessed valuation (EAV) in levy year 2011, along with a rise in property tax appeals. The credit benefits from its favorable location in southwest suburban Chicago (GO rated Aa3/negative outlook) and a modest debt burden.

The Series 2012A and 2102B bonds are secured by the district's general obligation limited tax pledge, which benefits from a designated levy with an unlimited rate.

The amount of the levy is limited by the 1994 property tax extension limitation law, which established the district's statutory debt service extension base (DSEB) of $2.087 million for non-referendum debt.

Commencing with the 2009 levy year, the district has been authorized to increase the base by the lesser of 5% or the percentage of the consumer price index during the preceding calendar year.

The district intends to use legally available funds from the bond and interest fund to cover debt service payments for the Series 2012A bonds.

For the Series 2012B bonds, despite projecting 0% growth over the life of the bonds, the DSEB figure is projected to provide coverage for the projected debt service. Based on the projected coverage from the bond and interest fund and the DSEB figure, the bonds are rated on parity with the district's general obligation unlimited tax pledge.

Further, given that the current balance in the bond and interest fund is in excess of the amount required for payment of both principal and interest of the Series 2007B bonds, no rating distinction is made between the 2012A and 2012B bonds.

Proceeds of the Series 2012A bonds will be used to increase the working cash fund of the district, with funds expected to offset a portion of the projected operating deficit for fiscal 2013. Proceeds of the Series 2012B bonds are expected to fund capital expenditures, including roof repaid and parking lot improvements for the district's high school campus.

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