Moody’s Investors Service has downgraded the village of Cary’s waterworks and sewage revenue debt to Aa3 from Aa2 due to a weakening of debt-service coverage ratios. The downgrade affects $5.4 million of bonds.

The village, located in McHenry County in northeast Illinois, saw the coverage increase through the mid-2000s. It peaked in 2008 at 2.77 times, well above the required covenant rate of 1.25 times.

Connection fees began falling in 2008 along with interest income, and the coverage ratio has dropped to 1.05 times.

On a positive note, the village has $6.7 million of restricted funds to cover future debt service and a $2.4 million reserve fund that provides additional flexibility to pay debt service.

It also has a policy of increasing rates 3% per year at minimum, and can increase them as much as 5%, depending on the consumer price index.

The village is primarily residential, with above-average wealth and income.

Little to no further growth is expected beyond its current 6,400 customers. No new debt is planned.

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