S&P raises Lake Zurich's bond rating

The village of Lake Zurich has had its bond rating upgraded from A1 to AA by Standard & Poor's ratings service.

The upgraded rating applies to the 2009 A, B and C bonds approved in February.

"This is a real plus," said Village Administrator Bob Vitas. "It will mean savings for the village."

Trustee Suzanne Branding expressed concern about the possibility of the burden of paying the bonds falling on the shoulders of property tax payers.

Al Zochowski, the village's finance manager, said it is possible for the general obligation bonds to fall to the taxpayers, but he does not expect that to happen.

"As long as the projects that we're talking about come to fruition ... there will never be a need to ask the taxpayers to pony up (the money to pay bondholders)," Zochowski said.

Vitas said the village's general fund reserve has stabilized and he expects the budget to remain stable in the next four to five years.

He added the village will save money through the upgraded rating because it allows the bonds to be issued at a 3- to 4-percent rate instead of a 6-percent rate.

Lake Zurich issued four series of bonds in February to restructure its debt. The village did this to ensure it could make principal and interest payments to previous bondholders and make its annual tuition reimbursement payment to Lake Zurich Unit District 95 on time.

The village reimburses the school district for tuition from students in the tax increment financing district for downtown redevelopment; last year's $532,000 bill was paid months late.

Officials said the refinancing would give the TIF district time to start generating more revenue as its new developer, Equity Services Group, is scheduled to make a project proposal by September 2010.

The debt from the TIF stands at $28 million - slightly more than the village could pay off by the end of the special tax district's life, given its current annual revenue of $1.3 million.

The village considered seeking an extension of the TIF to ensure the debt would be paid off in time. Officials decided not to pursue the extension because they are confident in the redevelopment plan.

However, officials said that if no progress is made in redevelopment, the village could find itself needing to restructure debt again in four or five years.