Two months after property tax funds have been imagined to be due, Cook dinner County, Illinois, continues to be struggling to calculate and ship out correct payments for the second a part of 2024.
Which means native governments and faculty districts within the nation’s second most populous county face delays in receiving a core tax income stream.
As of Tuesday,
“For some purpose this occurs extra regularly in Cook dinner County than anyplace I do know within the nation,” mentioned Richard Ciccarone, president emeritus at Merritt Analysis Providers, an Investortools firm. “It is spurred a variety of short-term borrowing up to now.”
County bureau of finance spokesman Edward Nelson mentioned the county’s money reserves will suffice to pay all its obligations in the course of the delay.
In October, the county’s finance staff can be going to the board of commissioners to ask for authority to borrow as much as $75 million from the county’s working money to service debt on excellent common obligation bonds, that are secured by property tax revenues.
“We don’t anticipate any challenges with getting this accredited,” Nelson mentioned.
Whereas the county can trip the delay out, some college districts and municipalities inside the county could also be pinched, Ciccarone mentioned.
Many cities have diversified income sources, or the power — in the event that they’re dwelling rule — to levy new revenues. However college districts rely extra closely on property taxes.
Illinois college districts are allowed, underneath sure situations, to switch cash of their working money fund into the final fund, and might problem working money bonds, Ciccarone famous. And most college districts within the county are in fairly wholesome form by way of money readily available.
“Whenever you get the second invoice, not everyone’s in bother,” he mentioned. “Does that imply nobody’s in bother? It doesn’t.”
On Sept. 18,
The county is dwelling
By way of Friday, any political subdivision within the county besides Chicago or Chicago Public Colleges can apply for a mortgage by means of the fund if it has a decrease bond score than the county and fewer than 120 days money readily available.
Nelson mentioned the loans are interest-free, they usually’ve acquired 10 functions to date.
“We imagine the $300 million is enough based mostly on our expertise offering this help beforehand. Nonetheless, if we do turn out to be oversubscribed, we might allocate the out there assets in an equitable method offering reduction to our most weak communities first,” he mentioned.
The county treasurer’s workplace has blamed Tyler Applied sciences — the Plano, Texas-based software program firm offering a brand new system to interchange the county’s legacy one — for botching the unique timeline, which might have had the county undertake the brand new software program in Could. Tyler has accused the treasurer’s workplace of inflicting the delay, based on the
“Tyler has labored and can proceed to work diligently with Cook dinner County on all points of the software program transition and implementation,” an organization spokesperson mentioned by e mail.
The spokesperson didn’t reply to questions on when correct payments would possibly exit.
The Cook dinner County undertaking required Tyler to mix 10 totally different legacy programs — in use by the county assessor, treasurer and clerk places of work — right into a single system, and to transform 20 years of knowledge from these programs. At one level, the county requested the information be transformed again to the unique system to adjust to a board audit.
Helen Samuelson, a director at S&P, mentioned property taxes solely made up 14% of the county’s common fund income in 2024, and the delay is extra more likely to hit credit with low liquidity and reserves, together with town of Chicago and Chicago Public Colleges.
“We imagine most entities we fee within the county have enough inside liquidity or entry to exterior liquidity to handle vital fee delays,” Samuelson mentioned by e mail. S&P assigns Cook dinner County GOs an A-plus score; the outlook is steady.
Ashlee Gabrysch, Midwest area supervisor for native authorities scores at Fitch Rankings, mentioned the score company takes a holistic view of the late distribution of the property tax payments.
“If the county fails to make strides in remedying the late property tax payments going ahead and will the lateness rise to an annual incidence, this might point out administration weak point and thusly might have a detrimental affect on the score,” Gabrysch mentioned by e mail.
“At this level, Fitch is just not anticipating that this would be the case,” she added.
Fitch assigns the county’s common obligation bonds a score of AA with a constructive outlook.
Moody’s Rankings charges the county’s GOs Aa3 with a steady outlook.
A benchmark desk of medians from Merritt going again to the mid-2000s reveals Illinois college district liquidity situations have improved through the years.
“Each cities and faculty districts in Illinois lately have accrued comparatively giant fund balances in comparison with earlier years,” Ciccarone mentioned. “It is mirrored in not solely increased fund balances, however increased days money readily available, each for the final fund and for governmental actions.”
However Cook dinner County college districts have the next reliance on property taxes than college districts throughout the state — the median is 58% of the governmental actions fund for county college districts, versus solely 56% for statewide college districts, based on a Merritt peer group evaluation of 89 Cook dinner County college districts with a inhabitants of 15,000 and above.
Based mostly on the latest monetary statements out there — generally, fiscal yr 2024 — college districts in Cook dinner County are typically in higher form than their statewide friends. The median stage of common fund days money readily available for the county’s college districts was 205 days, versus 194 days for college districts throughout the state.
For varsity districts within the county, the median stage of common fund income that is made up of state sources is 31%, versus 37% for college districts throughout the state.
Many college districts are nonetheless operating a lot bigger days money readily available balances than they have been pre-COVID, thanks partially to federal pandemic reduction funds.
Nonetheless, Ciccarone flagged a brief record of faculty districts with decrease ranges of days money readily available, much less snug fund balances and better property tax reliance which are in danger — if not of default, then at the very least of dilution, the place there’s a depreciation within the credit score’s bond pricing.
“There is a confluence of issues, of potential impacts on their income sources,” Ciccarone mentioned. “A number of income sources are in brief provide. Along with the delay in property taxes coming in — which appears to be like prefer it’s poised to be a major delay — we’re additionally more likely to expertise, significantly for much less rich college districts, vital decreases within the quantity of federal assist that they are going to get.
“They are going to get a double whammy, slicing into their revenues for the start of fiscal 2026,” he mentioned.
The college districts on that record embody Dolton West Faculty District in Riverdale, Chicago Public Colleges, Prospect Heights, Evanston Neighborhood Consolidated Faculty District 65, Homewood Faculty District 153 and LaGrange Faculty District 102.
The underside 4 of these college districts have dipped very low of their debt service fund balances, Ciccarone mentioned.
CPS, which has lower than 5 days money readily available within the common fund, based on Merritt, and fewer than seven days general, has relied on tax anticipation notes and should accomplish that once more on this case.
“When you go down the trail of tax anticipation notes, you are on the subsequent stage,” Ciccarone mentioned. “After they had a credit score disaster in 1979, it was the short-term debt that brought about the most important drawback. They have been rolling over their TANs on the finish of the yr as an alternative of retiring them. They
When it comes to municipalities, Ciccarone mentioned municipalities like Chicago, Riverdale, Forest Park and Calumet Metropolis are on his radar resulting from typically weak liquidity or situation numbers.
“Many of the cities are in good condition; they do not rely on their property taxes very a lot for his or her operations,” Ciccarone mentioned. “The priority is the affect (late property taxes) have on their debt service or pension funds.
“The internal ring, older suburbs are usually extra reliant on property taxes,” he added.
