Thursday, July 10, 2014 || By Michael Romain
MAYWOOD–At a Legal, License and Ordinance Committee (LLOC) meeting last night, the Village’s rather perilous financial condition came under unusually intense scrutiny, as the Board discovered that the Village doesn’t have a bond rating and the Mayor questioned the Village’s ability to pay its bills, let alone purchase necessary equipment, such as ambulances and public works trucks.
During a presentation on the possibility of refunding a series of corporate bonds that the Village had refinanced in 2005 in order to decrease its debt service requirements, Kevin McCanna, President of Speer Financial, Inc.–the firm that would assist the Village in the refinancing process–said that Maywood’s bond rating has been effectively withdrawn for some time. He said that the rating had first been downgraded from ‘A’ status to somewhere in the ‘B’ category before the Village’s rating was taken away altogether.
“In 2005, we had ‘AAA’ credit,” said Mayor Perkins, who was then a Trustee. “After 2005, it was [gradually] downgraded.”
McCanna said that the Village’s chronic lateness in preparing its annual financial statements, in addition to the poor state of its finances in general, all factored into the downgrade.
“The rating services felt they weren’t getting up-to-date information so they downgraded,” McCanna said. “At that point it didn’t make any difference,” he said, since the Village had already purchased a series of bonds and the interest rates on those bonds were set at the time of purchase.
The Village’s financial condition isn’t entirely its own making, though. McCanna also noted that the precipitous drop in property values throughout Cook County has also played a role in Maywood’s creditworthiness.
According to the Cook County Clerk’s office, the total Equalized Assessed Value (EAV) for Cook County–which is the total taxable value of all property in the County after the multiplier is taken into account–has decreased by more than 26 percent since 2010. Typically, lower EAV’s translate into lower tax revenue for taxing bodies such as Maywood, which in turn may negatively impact their creditworthiness or lack thereof.
McCanna said that practically every municipality in Cook County has experienced a drop in assessed value within the past several years and “as the [drop in values has] continued on every year in Cook, [taxing bodies in the county] are getting a lot of downgrades.”
Although the Village’s nonexistent credit rating doesn’t affect its ability to refinance the bonds it already has, if it ever needs to acquire new bonds to pay for operating expenses, however, its non-existent credit rating could come into play–and with potentially harmful side effects.
No Money to Pay the Bills
Mayor Perkins experienced just how harmful those effects could be when, during a routine inquiry with the Hickory Water company–the vendor responsible for providing and refilling the 5-gallon bottles of water that sit in some Village offices–about the Village’s status of payment, she learned that Maywood was 160 days behind on its bill. But, according to the Mayor, that only scratches the surface. There are others, such as the bill owed to the firm to which the Village outsources its internal investigation services.
During last night’s LLOC meeting, the Mayor’s concern about the Village’s ability to pay its bills was such that she voted against the purchase of a second new ambulance, which Fire Chief Craig Bronaugh said was urgently needed. Although earlier this year, the Board authorized the acquisition of a new ambulance, the Chief said that his department is still handicapped by the poor state of the two remaining vehicles in its fleet of three.
At one point this year, he said, all three vehicles were out of service and the fire department was reduced to asking a neighboring department if it could borrow one of their vehicles. Bronaugh requested that the Board authorize a lease-to-own arrangement for a vehicle that would cost nearly $100,000.
“I disagree with purchasing the ambulance [because] there are bills we have not paid,” the Mayor said, although she noted that this is only the case with certain bills and not all of them.
The Village’s finance director, Lanya Satchell, concurred that the Village does have a number of payments outstanding, but said that the Hickory Water bill might have been an isolated incident, since it isn’t typical for the Village to be that far behind on its payments.
She said that, although the Village doesn’t have money “sitting there” to fund the purchase of the vehicle, the costs could be juggled along with other expenses and that the savings from the purchase of both the new ambulance, along with a new truck that public works director John West requested, would potentially offset their upfront costs.
Despite Trustee Michael Rogers pointing out that the purchase was already budgeted and that the Chief was only asking that the Board extract money that had already been allocated, the Mayor voted no and Trustee Cheryl Ealey-Cross abstained in the vote to move the matter to a regular board meeting for final consideration.
The recent hand-wringing over the purchase of the vehicles begs the question of whether or not the Village might need to borrow more money (in the form of bonds) in the future in order to finance urgent expenses and whether or not, with a credit rating that doesn’t exist, the Village would even have the capability of borrowing more money if it comes to it.
Kevin McCanna said that his firm would need to go through the recently completed FY2012 financial audits, to see whether or not the Village’s finances have improved to the point of warranting a decent bond rating. With pressure now being applied from the Cook County Sheriff’s office for the Village to catch up on its financial audits, perhaps that rating may be better than the present state of things suggests. VFP