Suburban Chicago school district restored to investment grade

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A suburban Chicago school district stung by federal regulatory and criminal probes over a former superintendent’s misuse of bond proceeds won back its investment grade rating.

Moody’s Investors Service last week raised Will County Community High School District 210’s rating to Baa3 from Ba1 and assigned a stable outlook. The district, known as Lincoln-Way, serves 6,700 students in suburbs about 40 miles southwest of Chicago and has more than $200 million of debt.


“The upgrade to Baa3 reflects the district's increased reserves and liquidity, which are the result of stronger budgetary management and consecutive years of surplus operating results,” Moody’s said. “The rating also considers the large, affluent tax base, above-average debt burden with escalating debt service, and contingent liability risk associated with the state's share of the district's poorly funded pension liabilities.”

The district’s rating turnaround began in March 2018 when Moody’s shifted its outlook to stable from negative. Lincoln-Way lost its investment grade status in 2016 amid the fiscal mismanagement scandal, which included the misuse of bond proceeds from 2008 to 2012.

A probe by the Securities and Exchange Commission and Department of Justice disclosed by the district in 2016 led to the filing in 2017 of criminal fraud charges against the district’s former superintendent, Lawrence Wyllie. He was accused of using bond proceeds to inflate the district’s apparent fiscal health.

“As a result of the scheme, defendant Wyllie fraudulently caused Lincoln-Way to assume at least $7 million in additional debt by the fraudulent issuance of bonds, on which Lincoln-Way continues to pay interest, as well as suffer a loss of at least $80,000 in school district funds that were misappropriated and misused by Wyllie for his own personal benefit,” U.S. Attorney documents said.

Moody’s cut the district to junk in late 2016 after having slapped it with a five notch hit to Baa3 the previous year over its weak finances and use of short-term borrowing to deal with fallout from the district’s disclosure of improper accounting of past bond proceeds.

Moody’s said the district has since implemented a number of enhanced financial policies and procedures, including the maintenance of five-year operating projections and a fund balance policy that requires the district to achieve a 3% surplus each year until it reaches 33% of budgeted expenditures.

The district has hired a new superintendent, finance director and assistant superintendent of business operations, and operating reserves are on the mend. Before 2017, the district has posted six years of operating deficits.

The district recorded an operating surplus of $5.04 million in fiscal 2017, $8.01 million in fiscal 2018, and $6.04 million for the fiscal year ended June 30, 2019, and it has replenished its fund balances by $19.09 million over a three-year period, the district said in a statement.

“This rating improvement serves as another valuable independent assessment of the district’s financial improvements,” Superintendent Scott Tingley said in a statement.

The district’s debt service schedule remains a strain on its balance sheet and its statement suggested that a bond restructuring is under consideration.

“Moving forward, the Board of Education will continue to consider solutions to the district’s current long-term debt structure. The increase in the bond rating to investment grade provides the district with better alternatives to restructure,” read the statement. The board meeting on Aug. 29 and its municipal advisor, PMA, will “present alternatives for the board of Education to review.”

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