Fitch Ratings upgraded Cook County, Illinois, to AA-plus from AA on Monday, citing the county's moderating long-term liability burden, restrained new money debt issuance and sustained resource base growth. The outlook is stable.
In addition to upgrading the county's issuer rating and general obligation bond ratings, the rating agency also bumped the rating on Cook County's sales tax bonds to AA-plus, pointing to strong debt service coverage by Fitch-stressed pledged revenue.
"The ratings also incorporate aaa financial resilience, driven by the county's High Midrange budgetary flexibility, and Fitch's expectations that unrestricted reserves will remain at or above 10% of general fund spending, consistent with the county's long-term performance," Fitch said in a statement.
"We are incredibly proud to receive these upgrades of Cook County's bond rating," Cook County Board President Toni Preckwinkle said in an emailed statement. "We are grateful for the recognition of our hard work and will continue to build on the fiscal progress we have been making over the years. Receiving six upgrades in five years confirms we are on the right financial path."
"This is an important recognition that also helps lower borrowing costs, which saves taxpayer dollars," added Cook County Chief Financial Officer Angela Manning-Hardimon in an emailed statement.
The county limits debt service growth to 2% per year, thus curbing increases in its long-term liability burden, Cook County Bureau of Finance spokesman Ted Nelson noted by email.
The county's efforts to moderate its long-term liabilities include pension contributions above the state statutory pension funding limits for fiscal years 2016 through 2023, Nelson said. Those supplemental contributions were later codified into a state law that took effect Jan. 1, 2024.
With the supplemental contributions, the Retirement Fund's legacy unfunded pension liabilities are expected to be fully funded by 2047, Nelson said.
The county has seen its resource base grow through the implementation of three relatively new laws impacting sales tax revenues, Nelson said.
Two of those laws amended the retailers' occupation tax and implemented a series of structural changes to Illinois' sales tax, requiring "remote retailers" and "marketplace facilitators" to remit state and locally imposed sales taxes for the jurisdictions where the product is delivered.
Those changes took effect in 2021. Another law, which took effect in 2025, requires all retail sales from outside Illinois and made to Illinois customers by retailers with a physical presence in Illinois would be subject to the destination-based retailers' tax, effectively enabling local sales taxes for online purchases.
"The impact of (the 2025 law) has been greater than anticipated, with sales tax receipts exceeding budgeted revenues by $114.3 million in the first year," Nelson said.
The county's board of commissioners is slated to decide this week on the issuance of
In its rating report, Fitch flagged historical weakness in revenue performance. It also said "carrying costs to governmental expenditures and liabilities to governmental revenue remain weak."
"Cook County's general fund budget is highly reliant on sales tax revenues, which are generally more sensitive to shifts in economic conditions and changes in consumer and business spending," Rinaldi and Tjia said, noting that sales taxes are the main driver of Cook County's revenue performance.
Nelson noted the weakening of revenue performance highlighted by Fitch applied to the three-year period ending in fiscal 2020 and was likely a reflection of the COVID-19 pandemic, among other things.
"Performance has not weakened in recent years as we have seen year-over-year growth," he said.
As for the latter concern, Nelson said Preckwinkle has made significant strides in pension funding since taking office, and the county has sought to balance fiscal responsibility with community needs.
"The county has been judiciously refunding GO bonds when possible without pushing out principal repayments," he said. "Currently the principal outstanding is $2.7 billion as the county has implemented debt policies to keep increases in the debt service below 2%. By 2035, the county's legacy GO debt fully amortizes."
