Moody’s Investment Services has downgraded Elk Grove Village’s bond rating from the highest AAA rating, which the village has enjoyed for three years, to the second-highest AA1.
Moody’s has revised the bond ratings of Illinois municipalities taking into account unfunded state and local pension liabilities, Elk Grove Village Mayor Craig Johnson said Wednesday.
The downgrading of bond ratings could result in increases in local property taxes and affect interest rates when the village needs to borrow funds. In December, Elk Grove Village issued $38 million in bonds for a large public works project involving repairs and upgrades to its stormwater drainage system and sanitary sewers.
“Right now, we have no intention of borrowing money,” Johnson said. “The impact on the taxpayers at this time is nothing. If we have to borrow money in the future and if our bond rating doesn’t go back to AAA, (taxpayers) pay more.”
Local pension benefits are determined by state lawmakers who have talked about pension reform for years but have been unable to come to an agreement to close the $97 billion retirement funding shortfall.
“When I became mayor back in 1997, Elk Grove’s public pensions were fully funded,” Johnson said, noting that those pensions are 20 percent to 40 percent underfunded today. In 1997, 20 cents of every property tax dollar was devoted to pensions, whereas today nearly 42 cents of every dollar goes toward pensions, Johnson said.
“This occurred despite the fact that Elk Grove contributed 100 percent or more of its actuarial required payments into its pension funds each year,” he said. “Elk Grove has never missed a pension payment.”
Moody’s report noted that Elk Grove has competent management, conservative budget practices, a low debt burden, strong fund balances, and a well-leveraged industrial tax base.
“We’re doing everything right,” Johnson said. “The state’s inability to resolve the pension issue is coming back to hurt us. That’s what’s so disheartening. Our taxpayers are now being hit. We’re going to be letting all our state representatives and state senators know about that.”Copyright © 2013 Paddock Publications, Inc. All rights reserved.