Chicago Suburb Stung Ahead of Ballpark Issue

baseball-fotolia.jpg

CHICAGO – Rosemont, Ill. took a one-notch credit hit from Moody's Investors Service as it prepares to take on more debt to finance a new minor league stadium.

Moody's lowered the village's rating to Baa1 and said further negative action is possible by assigning a negative outlook to the Chicago suburb.

S&P Global Ratings affirmed the village's A rating and stable outlook.

The rating actions come ahead of the sale of about $100 million of general obligation debt early next month. Most of the issue is structured as tax-exempt, with a taxable piece included as the proceeds will involve some private use.

Mesirow Financial is underwriting the bonds and Ring McAfee & Co. Inc. is advising the village.

The downgrade "reflects the village's significant and growing debt burden combined with greater operating risks arising from reduced reserve levels and expansion of non-essential enterprise ownership," Moody's wrote.

The rating also incorporates the village's economic ties to the greater Chicago metropolitan region, moderate post-employment liabilities, and strong revenue raising flexibility given its status as a home-rule unit of government.

"The negative outlook reflects the possibility of downward rating movement given the negative trajectory in available operating reserves and a growing debt burden tied to aggressive economic development initiatives," Moody's said.

The village sought to highlight S&P's affirmation and questioned the downgrade especially given S&P's confirmation at the higher level.

"We're very confident in our strong financial position and our ability to repay our debts in a prompt and timely fashion," Rosemont Mayor Brad Stephens said in a statement.

The statement suggested that the reason might stem from the village's unique characteristics that make it hard to hold up to typical municipalities of its size for a comparison of financial metrics.

"Standard and Poor's has used the same analyst to cover Rosemont for over ten years and they are more familiar with the nuances of Rosemont's economy and various operations," the statement read.

The village which is bordered by Chicago and O'Hare International Airport has just about 4,300 residents. It's known more for the enterprises it operates than as a typical suburb. Its operations include a theater, convention center, an arena, and softball stadium.

S&P noted the village's profile in its report: "Rosemont does not operate as a traditional municipal entity. Rather, it has leveraged its proximity to O'Hare International Airport, which lies just to the west across Interstate 294, to establish several enterprises and encourage commercial development that serves to broaden the village's economy and bolster tax base growth."

Proceeds of the sale will finance construction of a baseball stadium, commercial building, two parking garages, and TIF district infrastructure improvements related to the stadium development, said village finance director Don Calmeyn.

The village's board of trustees in September approved a financing plan for the $55 million, 6,300-seat minor league stadium. The village signed a 20-year lease agreement with an ownership team known as Rosemont Entertainment Group that plans to launch a new franchise that would play in the 12-team member American Association of Independent Professional Baseball.

While ultimately secured by the village's general obligation unlimited tax pledge, some debt service is expected to be paid by a variety of other revenues from tax increment financing collections and enterprise revenues.

Stadiums have not worked so well for some suburbs. The south suburb of Bridgeview has struggled to repay $134 million of debt issued in 2005 to fund a major league soccer stadium.

S&P said its rating reflects the village's adequate economy, with access to a broad and diverse metropolitan statistical area, a concentrated local tax base, and adequate management.

While adequate, S&P said operating results could deteriorate in the near term relative to fiscal 2015, which closed with operating surpluses in the general fund. The village had an available fund balance in fiscal 2015 of 61% of operating expenditures.

Moody's downgraded the village to the A3 level in 2014 as it prepared to sell $37.5 million of taxable GOs to bring its public safety pensions up to near full funded status. The village had $368 million of debt at the time.

For reprint and licensing requests for this article, click here.
Illinois
MORE FROM BOND BUYER