Fitch Rts Cook County, IL’s $200MM GO Refunding Bonds ‘AA’
CHICAGO–(BUSINESS WIRE)–March 22, 2004
Fitch Ratings has assigned a ‘AA’ rating to Cook County, IL’s $200 million general obligation refunding bonds, series 2004A, which will sell on March 23 through a negotiated underwriting led by Banc One Capital Markets, Inc. and SBK Brooks Investment Corp. The Rating Outlook is Stable. Dated the date of issuance, the bonds will pay interest each May 15 and Nov. 15, beginning Nov. 15, 2004. and will mature Nov. 15, 2006-2023. The bonds are secured by Cook County’s full faith and credit pledge. Under the refunding bond ordinance, the county will use its unlimited ad valorem property taxes to repay the bonds and will transfer pledged taxes directly to the trustee. Bond proceeds will refund certain outstanding general obligation bonds.
The strong economic growth throughout Cook County has reduced the relative dependence on residential property taxes and modestly increased the county’s financial flexibility. While the county has improved its financial performance steadily in recent years without significantly raising the property tax burden, slower economic growth and continuing social service needs have required a hiring freeze on non-essential positions and the pursuit of an early retirement initiative. Demands for public safety and health services remain high, and senior governments have not fully compensated the county for additional mandates. The new Stroger Hospital of Cook County, which opened in December 2002, has the potential to deliver services more efficiently and economically, but continued management efforts will be necessary to sustain the county’s financial improvement. The completion of the county’s most pressing capital needs and a stable debt profile will allay financial pressures.
Cook County’s general obligation rating of ‘AA’ reflects continued strong financial performance and reduced spending pressures, achieved through better operational management and the prospects of diminished capital needs. The county completed its new hospital on time and within budgetary constraints. While the county’s primary responsibilities in criminal justice and health care are considerable and financially burdensome, the administration has limited growth of programmatic costs and staffing levels. General fund spending, after growing 10.7% annually from fiscal years 1987 to 1993, slowed to 5.3% annually through fiscal 2001. Budgeted personnel levels, which grew from about 22,700 in 1987 to 27,848 in 1995, declined to 26,522 by 2004.
With the completion of several detention facilities and the new Stroger Hospital of Cook County, the county’s capital needs have declined from expectations of several years ago. The cost of the new 464-bed replacement hospital under a guaranteed fixed-price contract was budgeted at $380 million through completion in 2002. Better facility organization, reduced maintenance costs, and declining needs for inpatient service capacity are expected to compensate for additional financing expense. The county’s remaining capital needs are a modest addition of court facilities. The county has made progress in reducing overcrowded conditions in jails by adding capacity to detention facilities and developing alternative programs to incarceration. Consequently, inmate populations have been stable in recent years.
Cook County, with a population of 5.4 million, is the most populous county in Illinois. In personal income terms, it represents 46% of the state economy. Per capita income is 6% above the state average and 14% above the U.S. average. While growing at a similar pace to that of the state, the county’s economy has shifted more toward service industries from durable manufacturing and has more closely matched U.S. industry distribution. Employment growth has averaged 0.6% annually in the 1990-2000 period, but declined 2.8% annually in the last two years. County unemployment, which tracks state patterns, declined to a low of 4.6% in 2000, but gradually increased to 7.3% in 2002. Unadjusted county unemployment decreased to 6.6% in December 2003 from 6.9% in December 2002.
Continued spending restraint and a strong economy have combined to improve the county’s financial performance. Governmental fund balances (general, special revenue, and debt service funds) increased to $515.9 million in fiscal 2001 (30.3% of spending) from $82.2 million in fiscal 1993 (7.8%). The general fund balance stood at $96.6 million (9.0% of general fund spending) in fiscal 2001, down from $151.2 million (14.6%) in fiscal 2000, as the county produced an $8.0 million shortfall, transferred an additional $8.3 million to the Forest Preserve District for deficit reduction, and absorbed $38.2 million of fund balance reductions for Governmental Accounting Standards Board Nos. 33 and 36 accounting changes and prior-period accrual adjustments. Preliminary unaudited results are not available, but the county’s general fund is more than adequate to address current fiscal pressures. Also, the county’s defined benefit pension plan is fully funded.
Although Cook County’s direct debt burden is low, at $475 per capita and 0.6% of full market value, overall debt is moderate, at a respective $3,416 and 4.5%. After remaining stable through the early 1990s, total overall debt has increased, with debt issuance primarily by the Chicago Board of Education, the Metropolitan Water Reclamation District, and the suburban municipalities.
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