Elgin keeps AAA bond rating — for now
By Mike Danahey email@example.com June 13, 2012 9:54AM
Updated: July 15, 2012 2:51PM
ELGIN — Fitch Ratings has assigned a “AAA” bond rating to the city of Elgin for $14.5 million in general obligation bonds and affirmed the ratings on $107.9 million in outstanding GO bonds on various ongoing capital projects.
That means a continued lower borrowing rate for the city. While giving a mostly favorable review, Fitch’s cautioned about a slowing growth rate, high unemployment and rising pension costs; and noted there are fewer casino dollars coming into city coffers.
City Chief Financial Officer Colleen Lavery said the new bonds will be used to fund work at the Airlite Water Treatment Plant and construction in Special Assessment Area 5, which includes Willard Avenue between Chicago Street and Villa Street, Illinois Avenue between Bent Street and May Street, Van Nostrand Place between Liberty Street and Illinois Avenue and Erie Street between Edison Avenue and South Street.
On June 27, Lavery will give a presentation to the City Council on the 2011 comprehensive annual financial report, a document which holds the information which led to the rating and which the city puts out each year for a federally required audit.
The AAA rating is the highest attainable by a municipality. It is the same one the city received in earlier this year for other bonds.
According to a press release, key rating drivers included “the city’s conservative fiscal management, extensive financial planning and healthy reserve levels provide ample financial flexibility.”
The release also noted that “the city prudently implemented several new revenue sources in 2012 to reduce dependence on property taxes and potentially volatile gaming revenues” and “all of the city’s non-self-supporting debt is retired within 10 years.”
On a less positive note, the report noted that the city’s growth has tapered off, with slight declines in equalized assessed value, and that “the city’s pension funding levels have historically been low despite the city’s practice of fully funding its statutory required contributions. Fitch expects recent benefit changes will help stabilize the funded positions of the city’s pension plans.”
It also noted Elgin’s unemployment rate in March was 12.7 percent, which was below past highs but still well above state and national levels.
Fitch’s report stated, “The city has prudently initiated alternative sources of revenue to offset declines in property tax revenues and diversify its revenue streams. The city implemented a refuse collection fee in January that is budgeted for $4.7 million of revenue in 2012. Additionally, new natural gas, electricity and alcoholic beverage taxes will commence on July 1, 2012, yielding an estimated $3.5 million in 2012. The sales tax will also be increased in July, though the additional 0.5 percent will be directed to a capital improvement fund.”
“The 2012 budget features a $7 million surplus, highlighted by revenue generated by the new tax sources. Additionally, the city has actively managed its expenses, and eliminated 29 positions in late January, saving $1.8 million in 2012. The city prudently budgeted for a 35 percent decline in casino revenue after the mid-2011 opening of a new casino in nearby Des Plaines. However, 2012 revenue from the casino is 12 percent ahead of budget through April,” the release stated.
“Direct debt has been kept low through the use of riverboat gaming revenues to finance capital improvement projects. Despite the decline in gaming revenues, these funds should still be adequate to finance most upcoming capital needs in the city’s five-year capital improvement plan.”
The comprehensive annual financial report is available on the city’s website, www.cityofelgin.org under the Doing Business in Elgin section under the Finance tab.