ROCK ISLAND — Rock Island County's credit rating has been downgraded from an A to BBB+, according to a report issued by S&P Global Ratings.
The report says the county's weak management, weak budgetary performance and weak budgetary flexibility contributed to the downgrade.
"The downgrade reflects the county's deteriorating reserve position resulting from structural imbalance," the report states. "This has led to a reliance on inter-fund loans and the issuance of tax-anticipation warrants to cover general fund obligations in the past two years."
S&P Global gave the county a stable outlook, but noted its credit rating is unlikely to change during the two-year outlook period.
S&P Global and Moody's Investor Service are the primary credit rating agencies in the country.
The report by S&P Global said the passage of an 11.9 percent increase in the county's portion of property taxes in its 2019 budget will help stabilize the county's chronic revenue and expenditure imbalances. However, the deferral of capital improvement projects and expense cuts have masked the severity of the imbalance, S&P Global said.
"The recent (tax) revenue increase is not sufficient for long-term stability," the report states.
Rock Island County Auditor April Palmer said the credit downgrade was a surprise.
"It's unfortunate it happened," Palmer said. "Moody's kept our bond rating the same."
In July, Moody’s gave Rock Island County an A3 credit rating score for the fourth year in a row. It is an upper-medium grade rating with a negative outlook. The top rating is Aaa, followed by Aa1, Aa2, Aa3, A1, A2 and then A3.
"On short term loans we might need, it would increase interest rates slightly," Palmer said. "That's really the only effect it's going to have on us at this particular time. If we wanted to refinance bonds, the interest would be higher. But we would not refinance at a higher interest rate. As long as we are not seeking debt, it will not have a huge impact on us.
"It is (S&P's) recommendation we are under-taxing our public," Palmer said. "Then we could do infrastructure improvements."
S&P Global said the county-owned nursing home, Hope Creek Care Center, had a $2.4 million deficit at the end of 2017, "due to terminating a private contractor that was managing the home and Medicaid reimbursements that weren't received due to the company's late requests to the state."
Hope Creek had $900,000 in unpaid vendor bills at the end of fiscal 2017, which has since grown to an estimated $1.6 million, the report said.
S&P Global notes Rock Island County has an adequate economy with an effective buying income of 86.2 percent of the national level and an unemployment rate of 5 percent in 2017.
S&P Global Ratings was founded more than 150 years ago and is also known as Standard & Poor's.
According to its website, it is the world's leading provider of credit ratings, issuing more than 1 million credit ratings to governmental, corporate, and financial organizations.