Sunday, December 24, 2017 || By Michael Romain || @maywoodnews
Earlier this month, Moody’s Investor Service, the credit rating company, announced that it had downgraded by a notch a series of outstanding bonds issued by the village of Melrose Park.
In a Dec. 5 statement, Moody’s announced that it had downgraded to Baa3 from Baa2 the rating of the village’s outstanding general obligation unlimited tax (GOULT) bonds.
“The village has $50.6 million of GOULT bonds outstanding, of which $24.3 million is rated by Moody’s,” according to the statement. “The outlook is revised to stable.”
Municipalities often issue general obligation bonds to finance capital improvements and purchases of major equipment. General obligation unlimited tax (GOULT) bonds require municipalities to levy a property tax, unlimited in rate or amount, dedicated to paying the bonds off.
According to Moody’s, “the downgrade to Baa3 is based on a very high and growing pension burden. While the village is substantially increasing contributions, pension underfunding will continue to worsen and potentially strain the village’s budget over the next several years.
“The rating further acknowledges the village’s adequate financial position, which reflects in part the deferral of pension contributions. Other credit characteristics include low resident income levels; a manageable debt burden; and broad legal flexibility to raise local revenue, which the village has recently used to increase pension funding and maintain an adequate financial position.”
In the statement, Moody’s also explained its revised outlook to stable.
“The outlook is stable as the current rating incorporates the risk that the village’s pension burden could grow further, despite the village’s willingness to raise taxes to increase pension funding and maintain its adequate financial position.”
Melrose Park officials could not be reached on Sunday for comment. Read the full Moody’s statement below. VFP