CHICAGO — Moody's Investors Service last week downgraded its rating on Cook County Forest Preserve to A1 from Aa2, driven by the district's mounting pension liabilities.
The county forest district is the latest Illinois local government to take a ratings hit due to pension problems, which are tied to the General Assembly's "legislative paralysis" on enacting pension reforms, Moody's said. The ratings agency has recently lowered its ratings on Chicago, Cook County itself, and the Chicago Park District.
The outlook on the district remains negative at the lower rating.
"The negative outlook reflects the formidable hurdles to achieving reductions in pension expenses for Illinois local governments," Moody's said. The state must enact changes to local government contribution levels, and constitutional protections could delay reforms.
The downgrade affects just under $188 million of general obligation bonds.
The district reported an unfunded pension liability of $101 million as of the end of 2012. Moody's, which uses more conservative assumptions, estimates the unfunded obligation at $245 million.
"The downgrade of the GO rating reflects the district's growing pension liabilities, which are a consequence of statutorily mandated contribution levels that are not based on actuarial standards of the Forest Preserves District Employees' Annuity and Benefit Fund of Cook County," Moody's said, adding that the actuarially determined annual contributions have increasingly exceeded actual contributions.
"The district shares much of its base with entities with significant and growing pension liabilities, including the city of Chicago, which comprises roughly half of the district's base."
Another pressure is the close relationship between the district and the county, which are governed by the same board, the ratings firm said.
On the positive side, the district enjoys a large tax base, healthy financial operations, and strong management, analysts said.