An action that bought Libertyville some breathing room on its Sports Complex debt also lowered the village's bond rating.
Interest rates on two bond issues authorized Tuesday by the village board were described as better than expected. But the issues, totaling $14.8 million, carried another message.
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"Because of the low reserves, we knew we were going to take a hit in our bond rating," said Mayor Terry Weppler.
Moody's Investors Service, which reviewed the pending sale, downgraded the village's rating to Aa3 from Aa1, in part because of its "significantly deteriorated liquidity position."
That means village reserve funds are nearly tapped because it has been using that source for years to pay the debt on the village-owned Sports Complex.
The Aa3 rating is in the second highest tier of Moody's listings, however, and bonds with that rating are considered a high-grade investment. The highest grade, Aaa, is described as "gilt-edged" by Moody's.
"This time, we're still in the double A category, which is good," said Pat Wesolowski, the village's finance director.
Village officials have been trying to sell the Golf Learning Center and Family Entertainment portions of the complex for a few years without success.
A recent auction also failed to draw acceptable bids, and village officials decided restructuring the bonds used to buy the land and build the complex would provide savings.
The Indoor Sports Complex, one of three distinct parts of the facility that opened in 2002 at Route 45 and Peterson Road, has been holding its own, but hasn't been making enough to cover the entire debt.
Since revenues have not been meeting expectations, the village has been subsidizing from its general fund, dropping reserves from $9.7 million to about $1.1 million, according to the Moody's review.
Moody's also affirmed a negative outlook for the village based on its reliance on "economically sensitive revenue streams" such as sales tax, which has been declining for several years.
A series of layoffs at Motorola and speculation the company could leave Libertyville also was noted in Moody's review.
"We definitely have challenges ahead," agreed Trustee Rich Moras.
By restructuring the bonds, the village pays a lower interest rate to investors, but lengthens the payment term by 10 years.
That means the village will initially save $1.2 million or more in annual debt payments. In 2010-11, the village expects to transfer $600,000 to cover the Sports Complex debt as opposed to the $2 million spent this year.
"The intent is to hopefully sell that property and pay off the bonds early," Wesolowski said.