Elgin maintains its top credit rating

Elgin has maintained its top AAA rating by Fitch Ratings, one of the nation's three largest credit-rating agencies, which officials touted as validation of the city's fiscal policies, including revenue diversification.

Fitch also cited the city's modest debt burden, Mayor David Kaptain said at the city council's committee of the whole Wednesday night. "That's a goal that many communities around us strive to achieve," he said.

"Credit ratings are the only objective, fact-based criteria in local government that provide feedback - not only in how the city manages its finances - but on the quality of the underlying policy decisions made by the city council," Elgin City Manager Sean Stegall said in a news release.

Only 83 cities nationwide - or 22.5 percent of the 368 cities currently rated by Fitch - earned such a rating, said Eric Friedman, director of public finance for Fitch Ratings.

AAA ratings point to the lowest expectation of credit default risk, Friedman said.

"It reflects a combination of all strong credit factors," he said. "In the case of Elgin, they have very high reserve levels, ample flexibility to adjust as necessary and a demonstrated willingness to do so; a sound economy and a strong management team."

Fitch's analysis also cites the city's diversification of revenues, which includes adding a refuse collection fee and taxes on natural gas, electricity and alcoholic beverages.

"Beginning in 2012, the city prudently initiated alternative sources of revenue to offset declines in property tax revenues and diversify its revenue streams," according to a news release from Fitch.

Councilman John Prigge, a frequent critic of revenue diversification, said he still believes the practice overall amounts to more taxes for residents and questioned the true value of minor variances among credit ratings.

The top rating means the city will have access to the best interest rates when issuing or refinancing bonds, officials said. Later this year, Elgin will consider issuing bonds as an option to finance road work, Stegall said.

"Our AAA rating puts us in the catbird seat," Kaptain said.

The city has "weak but improving" public safety pension funding, thanks to additional contributions starting last year, Fitch said.

"It pays to get ahead of the game and make some positive steps toward reducing our liabilities for pensions," Kaptain said.

The city's reserves amounted to 60 percent of expenditures at the end of 2013 and projects reserve equal to 44 percent of expenditures at the end of this year, the Fitch news release said. In 2016 and 2017, reserves will remain above the city's policy level of two months.

While Fitch doesn't set "absolute standards" for reserves, two months is "pretty strong," Friedman said.

Cities with strong ratings like Elgin are rated every other year, Friedman said. Fitch looked at the city's general fund and Riverboat funds, the latter comprising revenues and lease payments from Grand Victoria Casino, he said.

The analysis considered Elgin's $88 million in general obligation bonds and $5 million in revenue bonds. The city's general fund budget is estimated at $114.9 million and Riverboat fund revenues are projected at $11.3 million for 2015.

Standard & Poor's gave Elgin an AA-plus rating in August. The city's doesn't have a rating with Moody's.

"Both ratings by Standard & Poor's and Fitch reflect the city council's stewardship of the taxpayers' money," Stegall said.