CHICAGO - Moody's Investors Service dropped Cook County, Ill.'s general obligation rating to Aa3 from Aa2 due to overall deterioration in the county's credit profile and economic and political pressures on its sales tax.
The agency assigned a stable outlook to the credit, affecting $3.1 billion of GOs. The review by the agency was conducted as the county, anchored by Chicago, prepares to issue $520 million of GOs later this month . The sale includes $270 million of refunding bonds and $250 million of new-money GOs that likely will be sold under the taxable Build American Bonds program.
"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," said Moody's analyst Ted Damutz.
The political efforts to roll back or repeal the 1% increase in the sales tax approved last year is not helping either, Damutz added. The county board voted last month to repeal the tax pushed through by Board of Commissioners President Todd Stroger but Stroger vetoed it. His veto has survived several override attempts, including one yesterday.
The controversial increase pushed the tax to 10.25%, the highest in the nation. Although his veto stands, Stroger too has talked about some form of rollback. The increase was originally expected to generate an additional $400 million annually, but those figures have been revised downward by 6%.
The Moody's report also factored "uneven management" into its review. Stroger's chief financial officer, and cousin, Donna Dunnings, resigned late in April under pressure from Stroger amid concerns over her relationship with a fired county patronage employee. Stroger chief of staff Joseph Fratto has been serving as interim CFO.