CHICAGO -- Moody's Investors Service has downgraded two Chicago suburbs -- knocking one down three notches -- citing high pension obligation liabilities and looming statutorily required contributions.
Moody's cut its issuer rating on North Riverside by three notches to Baa2 from A2 and assigned a negative outlook. It also downgraded the village of Oak Lawn to A2 from A1 and maintained the negative outlook.
Elevated unfunded pension liabilities are to mostly to blame in both cases, analysts said. Both governments face statutory requirements that require them to increase their contributions starting in fiscal 2016 or they could lose their state share revenues.
The North Riverside downgrade also takes into account the city's "modestly sized, yet depreciating tax base with substantial concentration, as well as the city's modest bonded debt burden with a substantial unfunded Other Post Employment Benefits liability," analysts said. "The negative outlook is based on potential material declines in village reserves as it must come into compliance with statutorily required contributions in fiscal 2016 or risk losing state shared revenues."
North Riverside has $10 million of outstanding debt certificates, secured by the villages limited-tax GO tax pledge.
Oak Lawn benefits from a mature and diverse tax base tied to the Chicago metro area as well as the ability to raise revenues. Oak Lawn has $71 million of outstanding Moody's-rated general obligation bonds outstanding as well as an additional $26 million of unrated debt.
Both cities are located in Cook County.
