Moody's Investors Service said it has downgraded to A1 from Aa2 the general obligation rating of the Chicago Park District.
The district has $428 million in general obligation limited tax (GOLT) debt and $448 million of general obligation unlimited (GOULT) debt outstanding. The outlook has been revised to negative from stable.
The district's outstanding GOULT debt is secured by a pledge to levy a tax without limitation as to rate or amount. The district's outstanding GOLT debt is supported by a dedicated levy that is unlimited as to rate, but limited in amount by the district's debt service extension base.
The A1 rating reflects the large overall debt and pension burden on the district's tax base, which reflects significant debt and pension obligations of the city of Chicago (GO rated A3/negative outlook), the tax base of which is coterminous with that of the park district.
Also incorporated into the A1 rating are the district's growing pension obligations, healthy financial reserves, modest direct debt burden, and substantial and diverse tax base.
The district's GOLT bonds are rated on parity with the district's GOULT debt due to the presence of the designated levy with an unlimited rate and sufficient coverage under the DSEB base. The A1 rating also reflects the district's relationship with the city of Chicago. While the city and the district are legally distinct entities, the mayor appoints the park district board, a structure which closely aligns the district's governance with that of the city's.
The negative outlook is based on the likelihood of continued growth in unfunded pension liabilities among overlapping governmental entities, particularly the city, which should further leverage of the property tax base shared by the city and the district.