The Rating Outlook remains Negative.
The bonds are a general obligation of the village backed by its full faith and credit and unlimited taxing power.
KEY RATING DRIVERS
NEGATIVE OUTLOOK DRIVERS: Fitch views financial flexibility as still strong, but the village's fund balance levels have dropped to levels well below policy targets, while pension costs are expected to increase to improve plan funded levels.
MULTIPLE REVENUE SOURCES:
SALES TAX REVENUE STRENGTH: Sales tax revenues, the village's largest source of funding, recovered well from a recession-led decline. This revenue source is anchored by several prominent shopping malls which attract consumers from throughout
FUND BALANCE AND PENSION FUNDING: Failure to bring fund balance levels materially closer to policy levels while continuing to make increasing statutorily-required pension payments, will result in downward rating pressure.
ECONOMY ANCHORED BY SUCCESSFUL MALL
The village has a diverse economic base led by three large shopping centers, including the
A new train station opened in 2012 and has enhanced commuters' access to
DIVERSE REVENUE SOURCES LED BY SALES TAX
The village has substantial ability to raise revenue from diverse sources and as a result has maintained a property tax levy freeze since 1991. Its primary revenue source is sales taxes, comprising 38% of general fund revenues. After a notable decline in fiscal 2009 (year ended
Management implemented a utility tax in fiscal 2011 that yielded
RESERVES REMAIN BELOW PAST LEVELS AND POLICY TARGETS
General fund balances declined for several years despite considerable revenue flexibility and active expense management that included a hiring freeze since late 2008. However, in fiscal 2012 the village had an operating surplus (after transfers) of
For close to two decades the village had maintained an unreserved/unrestricted fund balance in the range of 25%-40% of spending. Fitch viewed this trend as an important factor in the village's exemplary 'AAA' rating, particularly given its reliance on economically sensitive sales tax revenue. Maintaining this rating depends on the village's ability to continue to meaningfully increase its fund balance towards its goal of 25% while continuing to fund its pension plans at statutorily required levels.
MODERATE CARRYING COSTS; UNDERFUNDED PENSIONS
The village manages pension plans for fire and police and participates in the state's municipal retirement plan. Using Fitch's assumed 7% rate of return, the fire plan is funded at a weak estimated 54% while the police and state plans are estimated at a stronger 66% and 78%, respectively. Contributions to the police and fire plans are at actuarially calculated levels to improve funding to 90% by 2041, per state statute. The village's implicit rate subsidy for other post-employment benefits (OPEB) results in a low unfunded actuarial liability of
Additional information is available at 'www.fitchratings.com'.
In addition to the sources of information identified in Fitch's Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope,
--'Tax-Supported Rating Criteria' (
--'U.S. Local Government Tax-Supported Rating Criteria' (
Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria
Source: Fitch Ratings
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