Elgin stable, DuPage down with new credit ratings
Elgin maintained its top credit rating while DuPage County was downgraded a notch after Fitch Ratings revised its criteria.
The new rating system takes into account how government units fared through the Great Recession -- and how ready they might be to weather more of the same -- along with their ability to raise revenues.
Elgin, which has home rule, kept its AAA rating; DuPage County, which doesn't have home rule, dipped from AAA to AA+, both in the last couple weeks.
"In Illinois, the biggest difference among municipalities is whether they have home rule," said Fitch senior director Arlene Bohner, who manages the Great Lakes and Midwest region. Home rule exempts governments from the state's property tax cap law and gives them the power to establish other taxes, such as utility and liquor.
"We are trying to have a thorough economic cycle approach through our rating," Bohner said. "We are incorporating ways in which these municipalities might behave in an economic downturn, so we are not surprised."
Fitch, which rates 28 government units in Illinois, is gradually rolling out ratings under the new criteria released in April. The higher the credit rating, the less it costs a government to borrow money.
City Manager Rick Kozal touted the city's continued AAA rating, pointing to "the exceptional financial stewardship practiced by the city council."
Elgin indeed has demonstrated "strong budget management through the recent economic recovery," Fitch said in its analysis. The city hasn't increased its property tax levy in five years and projected $40.3 million, or 34 percent of expenses, in general fund reserves this year.
The city's news release also stated -- incorrectly, according to Fitch -- its finances were examined by Fitch "under a special analysis applicable to all Illinois municipalities because of the continuing budget stalemate at the state level."
Fitch looks at whether state payment delays have affected local finances, but that isn't unique to Illinois, Bohner said. "We don't have a separate criteria for Illinois municipalities."
Kozal said the "special analysis" statement was the result of a conference call with Fitch representatives a couple months ago. "They indicated that this year they were looking at all Illinois municipalities separately," he said, declining to elaborate.
"It's a very minor downgrade, and we are still in the upper 2.5 percent of counties in the country, instead of 1.5 percent," DuPage County finance committee chairman Paul Fichtner said.
Fichtner pointed out DuPage is rated by all three major credit rating agencies -- Fitch, Moody's and Standard & Poor's -- while most units of government choose to be rated by one or two. "Since 1991, we have gone the extra mile for transparency," he said.
The county has kept its property tax levy flat for the last eight years and projected $68.6 million in its general fund balance, or 38 percent of expenses, for the current fiscal year. The county has a solid cushion for an economic downturn, Fichtner said.
"The outlook (for the county) is stable," Bohner agreed. "And AA+ is a very strong rating. It's not too shabby."
Only Cook County has home rule among counties. "We all know how well they are doing with that," Fichtner quipped.