CHICAGO - Cook County, Ill., board president Todd Stroger this week is expected to veto the board's 50% rollback of a controversial 1% sales tax increase, setting the stage for what could be a successful veto override in early September.

The impact on the county's rating as a result of the latest clash between board members and Stroger over the tax increase is uncertain, but analysts have warned that a rollback would pressure the county's balance sheet as sales tax collections are already behind projections due to the recession.

Previous votes by the board to roll back the tax - which bumped the Chicago area's sales tax rate to the highest in the nation, at 10.25% - were vetoed, but supporters of the cut could not muster the 14 votes needed for an override.

In a vote Tuesday, 12 commissioners voted for the rollback. Another two who were not present endorsed the legislation. A total of 17 commissioners - who face re-election early next year - sit on the board. The board last year raised the county's share of the sales tax by one percentage point to 1.75%.

"President Stroger expects to veto the proposed rollback. He stands on his support for a fiscally responsible rollback of the sales tax increase ... President Stroger continues to argue that it is premature and fiscally irresponsible to roll back the sales tax by a full half a penny at this time," Stroger spokesman Chris Geovanis said yesterday.

Stroger has indicated he would support a quarter-cent rollback on the tax rate, but has not said when he would seek the change.

The county can't afford the cut, which could translate into a loss of about $140 million this year and $200 million next year, given other uncertainties, officials said.

"It is currently unclear what fiscal impact Cook County will have to shoulder in the wake of the passage of the state of Illinois' budget last week, and Cook County's health care system has not yet completed a strategic planning process that will also impact fiscal planning for the county," Geovanis said.

The county was hit with two downgrades ahead of a new-money and refunding debt sale last month. Fitch Ratings downgraded the credit one notch to AA-minus and assigned a stable outlook. Moody's Investors Service lowered the rating one notch to Aa3 with a stable outlook and Standard & Poor's affirmed its AA and stable outlook. The county has $3 billion of GO debt outstanding.

Moody's Ted Damutz attributed the downgrade to overall deterioration in the county's credit profile.

"Despite the county's large and diverse economy, it's feeling the impact of the current recession with big job losses, foreclosures. It's also impacting the economically sensitive sales tax revenues that the county has become so dependent on," he said.

The tax increase was expected to generate an additional $400 million annually for a total of $740 million in sales tax collections, but officials have since lowered that estimate by 6.4% due to the recession.

"A further decline in the rate beyond the 1/4% [that Stroger has proposed] would likely strain financial performance, and without commensurate revenue increases or expenditure reductions, could cause negative rating pressure," said Fitch's Melanie Shaker.

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