CHICAGO - The Zion Park District in Illinois lost its investment grade rating and faces further credit deterioration as its struggles with a rapidly declining tax base.
Moody's Investors Service on Monday, March 23 downgraded the district's general obligation rating to Ba1, one level into speculative grade territory, from Baa3 and assigned a negative outlook. It previously lowered the rating to the Baa3 level a year ago.
The park district's debt certificates - already in junk bond territory -- were lowered to Ba2 from Ba1. The ratings apply to $2 million of GO bonds and $400,000 of certificates.
"The Ba1 rating reflects the district's rapidly declining tax base; limited revenue raising ability as the district is operating at property tax rate caps in almost all of its major operating funds, and narrow operating Fund cash reserves," Moody's analysts wrote.
Analysts also factored in the district's reliance on regular borrowing to support debt service payments on outstanding debt, including plans to fully leverage its debt service extension base to support GO alternative revenue source debt service.
Analysts take a dim view of the district's prospects for a turnaround with the negative outlook reflecting their belief that the district's finances will remain limited, requiring regular borrowing to pay debt service on existing debt. They also expect continued, material tax base declines.
Discontinuing the practice of borrowing to cover debt service and implementing a plan that would allow its enterprises to be self-supporting could help stabilize the district's rating, analysts said.
The district is located far north of Chicago on the northern edge of Lake County with access to the Chicago and Milwaukee metropolitan regions. The district operates a swimming pool, two golf courses, two community centers, and 23 parks.
