An Illinois park district became the only local general obligation credit to default last year when it failed to pay principal and interest due in December on its $1.25 million of unrated Series 2015 GO refunding park bonds, Municipal Market Analytics said in its default trends report issued Wednesday.
The Dunleith Park District bonds, which mature in 2026, refunded the district's Series 2007 GO bonds, according to
The district in East Dubuque, Illinois, made a late partial payment and
The district has not filed an annual comprehensive financial report on EMMA since 2020, according to
Abdon Pallasch, spokesman for Illinois Comptroller Susana Mendoza, said the park district is compliant in its financial reporting through fiscal year 2021, but is delinquent on AFCRs
Rosanna Barbaro-Flores, director of the local government division in the comptroller's office, said the park district could owe the state annual financial reports or annual audits.
They owe the AFCR every year. But special purpose districts only owe the audit by a CPA if their revenues are over a certain level, and according to the park district's 2019 data, it was well below that revenue threshold, Barbaro-Flores said.
The park district did not respond to phone calls or emails seeking comment.
East Dubuque Treasurer Pam McCarthy via phone said she did not know what was going on with the park district and, "They're separate from us."
The official statement notes that enforceability of the bonds may be limited by bankruptcy, insolvency, moratorium or reorganization, and it's up to the county clerk of Jo Daviess County to extend and collect the property taxes as set forth in the bond ordinance.
The county clerk's office referred questions to County Treasurer Melissa Hammer, who said, "The only thing that we have knowledge of or control of is the collection of that [levy] amount. They request from the county the levy amount that they are extending. It's up to them to pay whatever they need to with the money that they levied for."
If the bond was sold to a local bank, there may be more of a casual attitude around repayment, since those bankers often have cozy relationships with small issuers like this, "where everything is built on trust," said Richard Ciccarone, president emeritus of Merritt Research Services, an Investortools company.
"We're talking about a small, getting smaller community, so it's pretty unsophisticated," Ciccarone said. "That casual style of management can place the bondholders … in a very vulnerable position, not knowing if you can count on a timely payment."
Lisa Washburn, managing director at MMA, told The Bond Buyer it's more common to see a local GO credit miss a payment for administrative reasons that are resolved very quickly. But the fact the park district was only able to make a partial payment suggests this is something more than an administrative issue, she said.
"This happens very infrequently — it is rare that a local GO defaults," Washburn said. "There have been some big names in the past, like Detroit and Puerto Rico. But on the whole, it is not a common occurrence."
Ciccarone said the default and the failure to post timely audits on EMMA could reflect a number of things: a lack of attention to detail or a lack of urgency about best practices. It might suggest they're lean on staff and therefore things can slip by, he said. Or it could reveal that they're hard-pressed for money and unable to repay the debt.
"The point here is that it's an example of how things can go wrong when you don't have information," he said.
The failure to file a timely ACFR over multiple years "can either be a sign of distress … [or] because the auditor hasn't signed off on it, because there is a problem," Washburn said. "Other times it could be because they're just behind.
"When you're looking at a period that's over two years in the municipal market, it definitely is something [where] you would want to investigate that credit further," she added. "It often is a precursor to finding out that there is a problem."
That lack of information is compounded by another issue with broad implications for the municipal market: the decline of local news.
The local newspaper covering East Dubuque and the surrounding area, the Telegraph Herald, announced in January that it was halving its print run, pointing to the economic pressures squeezing print media, local
Phone calls to two Telegraph Herald editors went unanswered.
Washburn said more information is needed, but MMA found no signal in the local press of the park district's problem.
"It's important to have timely financials, but if the financials aren't forthcoming, it's important to have people asking why," she said. "The lesser number of local reporters covering municipal finance just increases the information gap.
"There's no way any analyst could keep up on 30,000 individual borrowers," Washburn added. "News stories are important."
