CHICAGO - One rating agency dropped Rock Island County, Ill. out of the double-A category while another boosted it into the upper ranks, providing a stark contrast in credit views.
Moody's Investors Service downgraded Rock Island County three notches and warned of the possibility of further credit deterioration by assigning a negative outlook. The action lowering the rating to A3 from Aa3 impacts $29 million of general obligation debt.
"The downgrade to the A3 rating reflects six straight general fund operating deficits that have resulted in a substantial decline in reserve levels, coupled with increased stress on the county's Hope Creek Care Center nursing home facility that currently relies on Tax Anticipation Warrants for cash flow purposes," Moody's wrote.
The negative outlook reflects the agency's expectation that both the general fund and Hope Creek Care Center Fund will struggle to stabilize in the near term as expenditure pressures and liquidity concerns continue to pressure operations.
The rating's strengths incorporate the county's sizeable tax base that includes a portion of the Quad Cities area — made up of two Iowa cities and two Illinois cities — and a modest direct debt burden. Its other challenges include limited revenue raising flexibility.
Standard & Poor's on July 16 raised the county's rating one level to AA-minus from A-plus and assigned a stable outlook.
The rating reflects the agency's view that the county's local economy is adequate. Residents benefit from participation in the broad and diverse Davenport-Moline-Rock Island, Iowa-Ill. metropolitan region.
The county won praise for its zero-based budgeting and use of historical and third-party sources when building the budget, frequent review of budget-to-actual results, and strong investment management policies.
Available reserves at 13.5% of operating expenditures in fiscal 2013 provide strong flexibility and the county benefits from strong liquidity with available cash at 32% of government fund expenditures.
"The county has had a recent trend of small deficits in the general fund, but management projects essentially break-even results for the general fund in fiscal 2014. Total governmental funds are expected to be at a slight deficit," Standard & Poor's said. "The stable outlook reflects our view of the county's very strong liquidity and debt and contingent liabilities profile."
