Moody’s Investors Service hit Rock Island County Metro Mass Transit District in Illinois with a one notch downgrade to Aa3 over the district’s heavy reliance on aid from the struggling state to cover operations and debt service.
The action affects $9.2 million of outstanding general obligation debt. Debt service on the district’s rated bonds is paid with operating assistance revenues from the state although they benefit from being secured by the district’s general obligation unlimited tax pledge.
The bonds are secured through a covered abatement in which the district levies for debt service and does not abate the taxes until sufficient alternate revenues in the form of state operating assistance are received.
“The downgrade to the Aa3 rating reflects the transit district’s heavy reliance on the State of Illinois, from which the district receives two-thirds of its operating revenues. The state’s credit profile has weakened substantially,” Moody’s said. The rating company downgraded Illinois last month to A3 with a negative outlook over the state’s failure to enact pension reform during its regular legislative session.
The current rating also reflects the district’s: sizable tax base in the Quad Cities region of northwest Illinois; stable financial performance; increased ridership trends; average resident socioeconomic characteristics; and modest debt profile with average principal amortization.
