CHICAGO - Moody's Investors Service stripped the limited tax general obligation bonds of the Cook County Community School District 147 in Dixmoor, Illinois of their investment grade rating.
The rating agency dropped the suburban Chicago district's GOLT rating three levels to Ba1 and assigned a negative outlook on Aug. 17. The district's $3.6 million of rated GOLT bonds were previously rated Baa1. The district has a total of $7.8 million of GOLT debt outstanding.
At the same time, the rating agency assigned an issuer credit rating of Baa3, the lowest investment grade level, to the district. The stronger issuer credit rating represents the district's implied unlimited tax general obligation pledge.
"The Baa3 rating reflects the district's limited tax base with below average socioeconomic indices and unfavorable property tax collection trends; operating reserves that remain ample relative to the district's operating budget but are expected to continue to narrow given ongoing operating deficits and limited revenue raising flexibility; elevated debt burden; and exposure to unfunded pension liabilities due to its participation in statewide cost sharing plans," Moody's wrote.
The Ba1 rating on the district's GOLT debt reflects the nature of the dedicated levy that secures the GOLT debt, which is unlimited as to rate but is limited by the amount of the district's debt service extension base.
"While the district's DSEB is large enough to cover debt service needs on outstanding GOLT debt, poor property tax collection rates have forced the district to use other operating revenues to cover debt service costs," Moody's wrote.
Moody's said it remains concerned the district will continue to draw down reserves to fund district operations, including debt service, due to limited revenue raising flexibility and management's lack of near-term plans to enact spending reductions.
