Standard & Poor's Ratings Services said it lowered its underlying rating to BBB-plus from A-minus on River Grove, Ill.'s previously issued general obligation debt.
At the same time, Standard & Poor's assigned its BBB-plus long-term rating to the village's series 2012A GO bonds and series 2012B taxable GO bonds. The outlook is stable.
"The rating action reflects our view of the village's credit quality after its clarification of how Governmental Accounting Standards Board Statement (GASB) No. 54 will likely affect its unassigned general fund balance," said Standard & Poor's credit analyst Jennifer Boyd.
The rating further reflects the village's: small nominal unreserved general fund balance at year-end fiscal 2011 (April 30) that likely will become a negative unassigned general fund balance after the consolidation of nonmajor governmental funds into the general fund through GASB 54 starting with the fiscal 2012 audit; reliance on interfund and external borrowing for liquidity purposes; and lack of cash in the water and sewer fund at year-end fiscal 2011, eliminating a potential source of liquidity that had been strong as of fiscal 2008, and decline in cash in the 2006 capital projects fund that the district has been using for cash flow borrowing.
The stable outlook reflects the anticipation that the village will continue to make any budget adjustments it deems necessary to stabilize its operations and manage its cash flow needs, but that it will need time to rebuild its unassigned general fund balance from the level anticipated after the consolidation of the nonmajor governmental funds in the fiscal 2012 audit.