Three Consecutive Credit Rating Downgrades During Bury Tenure

Mayor Sandra Bury has enjoyed the almost unanimous support of the current Village Board for four years but has failed to adequately respond to Moody’s Investors Service demands resulting in the third consecutive downgrade of the village’s credit rating.

In August of 2013, Moody’s downgraded the Village of Oak Lawn’s credit rating from Aa3 to A1 and issued “a negative outlook”.  Despite that warning and despite having five votes on the Village Board to correct the situation, Mayor Sandra Bury’s administration has refused to change operations and procedures to improve the financial outlook.  As a result, the credit rating has continued to plummet putting the village on a dangerous course toward default.

In June of 2014, Moody’s once again downgraded the village’s credit rating from A1 to A2.   Each downgrade affects the cost of borrowing.  In both 2014 and in 2013, Moody’s listed various challenges facing the Village noting that operating reserves “remain narrow” and “recent declines in tax base value”.  The credit agency did not that the village had some strengths also including a “recent growth in operating reserves”.

The most recent downgrade by Moody’s was issued on February 9, 2017 from A2 to Baa1.  Once again, Moody’s listed “narrowed liquidity”, “rising pension costs” and “substantial tax base depreciation over the past five years”.   Moody’s historical ratings indicate that the problem has been well known to village officials, including Village Manager Larry Deetjen.  In 2006, after former Mayor Dave Heilmann was elected, the rating was set at A1.  The village was rated again in 2009 and received the same rating.  However, in 2011, the Village was downgraded to Aa3 and remained there until the August 2013 report.

Moody’s Investment Ratings are depicted in the chart below showing a drop each report.  When the credit rating dips below Baa3, the credit is not considered to be good enough for investment.  Moody’s calls such ratings, “Speculative/Non-Investment/junk” status.  Oak Lawn can be reduced two more levels before reaching “junk” status.

Mayor Sandra Bury delivered the “State of The Village Address”  five days after the village received the final report.  Contrary to unfounded speculation, spread by Mayor Bury’s supporters on social media, the village was told of the negative report and the downgrade prior to February 9th.  Also, contrary to the same political speculation, the village was allowed to provide contrary evidence in attempt to convince Moody’s to not downgrade the credit rating.

The village also has an opportunity to appeal the decision although successful appeals are unusual.

Mayor Sandra Bury spoke about the Moody’s report at the March 14, 2017 meeting, one month later after the Oak Lawn Leaf had released the news about the downgrade.  She set forth the pension burden the village faces while claiming the village board’s actions have been “heroic” in trying to pay down the pension debt.  Moody’s, however, noted the payments do not even allow the village to tread water on pension liability meaning the village continues to fall behind on pension obligations.

Village Manager Larry Deetjen said that he “disagrees” with Moody’s rating and bases it on his 30 years of experience in government.   Deetjen also called the board’s efforts “disciplined” to reduce the pension obligation.  He hinted that a tax increase may be the way to resolve the pension woes stating that the years ahead will be difficult and “probably the taxpayers will see on their (tax) bill attention to the costs that are associated with pensions.”

Deetjen said that the Standard and Poor’s Rating from 2015 is better than the Moody’s rating.  Deetjen also said that the City of Chicago has also complained about Moody’s, which rated the City poorly also.

Trustee Michael Carberry said he imagined that the rating would even be worse if they hadn’t made the contributions that were made.  Carberry did not address the fact that Moody’s specifically called those contributions insufficient to keep pace.

Trustee Olejniczak said that the board is “pro-union” and “pro-taxpayer” while Bury added that pension bonds would not have worked when first proposed several years ago by Trustee Robert Streit.  The plan put forth by Streit would have refinanced the pensions and brought funding to 100 percent.

No analysis was done by the board when Streit introduced the idea, which was dismissed immediately by Bury and her board of Trustees in unison.  The downgrade in the village’s credit rating now makes that idea untenable.