CHICAGO — Standard & Poor's downgraded Morrison, Ill.'s limited-tax GO debt certificates three notches to the lowest investment grade level of BBB-minus, and dropped its issuer credit rating to BBB, due to its ongoing fiscal challenges.

The city previously carried an issuer credit rating of A and its certificates were rated A-minus, one notch lower to reflect the limited security. The certificates are payable from legally available funds but do not benefit from being secured by a debt service levy. The outlook is stable.

"The downgrade is based on our local GO criteria released Sept. 12, 2013," said Standard & Poor's analyst John Sauter, "and reflects our view of the city's very weak budgetary flexibility, due to a negative (adjusted) available general fund balance position of less than negative 5% over each of the past four audited years."

The stable outlook reflects analysts' view that the negative available fund balance position will not deteriorate significantly within the two year outlook period, given relatively minor deficits in recent years and expectations for balanced operations in fiscal 2015. The report was published Sept. 12.

Positive credit action in the future is contingent on improvement in the fund balance position, which would likely require improved budget performance as well. If performance remains weak, the agency said it would expect the negative fund balance position to expand, which could lead to a lower rating.

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