After seeing its bond rating plummet five levels since 2011, North Riverside saw its creditworthiness rebound with the Oct. 14 publication of Standard & Poor’s bond rating for the village.
The improved rating came two weeks before the village expects to conduct a $2.8 million bond sale to pay for an ambitious street improvement program, purchase financial software and replace the air-cooling unit at the police department.
The target date for a bond sale is Oct. 27, according to North Riverside Finance Director Sue Scarpiniti.
Standard & Poor’s gave North Riverside an “A” rating and declared its financial outlook “stable,” although the ratings agency did express concerns about the village’s reliance on sales taxes and the financial pressure the village will continue to feel with respect to funding pensions and other post-employment benefits.
“When I was elected mayor three-and-a-half years ago, I pledged to improve the financial condition of the village and find a way to consistently make the village’s annual contributions to the police and pension funds,” Mayor Hubert Hermanek Jr. said in a prepared statement at the North Riverside Village Board meeting on Oct. 17. “We have made tremendous strides in our goals to fund our public pensions; however, we still have so much more to accomplish.”
The A rating represents a two-level improvement in the rating the village has endured since 2014, when Moody’s Investment Service downgraded the village to Baa1, meaning it felt North Riverside was a lower medium-grade credit risk. Moody’s had also given the village a negative outlook in 2014, an outlook the ratings agency reaffirmed in 2015.
Standard and Poor’s A rating places North Riverside in the upper medium-grade risk category.
The rating report published by Standard & Poor’s called out as positive the strong local economy, although it did note that 19 percent of the village’s revenues came from sales taxes generated by the North Riverside Park Mall.
“The village’s dependence on the North Riverside Park Mall does lead to volatility in revenues depending on the year to year consumer confidence,” the ratings report stated.
In addition, the report called North Riverside’s budgetary performance “adequate,” noting its history of balanced budgets and described the village’s budget flexibility and cash liquidity as “strong.”
“We believe that the village’s budgetary performance will remain adequate through fiscal 2017,” the report stated.
However, those positives were offset in the report by Standard and Poor’s description of a “weak” debt profile. It noted that the village has no debt plans and that its large debt obligations and post-employment benefit obligations will continue to be a problem in the future.
Police pensions, the report noted were 30.9 percent funded while fire pensions were 24 percent funded, with a net pension liability of $25.9 million. While the report credited the village for adopting a pension funding policy in early October, it stated that “due to this particular large [pension] liability, the funded level would not significantly increase for many years.”
Hermanek, in his remarks to the village board on Oct. 17, emphasized that the pressure of pension obligations would continue.
“Funding of our pension funds is not a short-term issue, so we must stay diligent in finding a manageable solution to this ongoing problem and continue to work together as a board and community to find a long-term solution,” Hermanek said.