Cook County bond rating outlook downgraded from stable to negative

After taking Cook County’s general obligation bond rating down a notch in January, S&P Global Ratings has lowered its outlook from stable to negative, citing pandemic and recession pressures.

The global ratings group also changed its outlook on the county’s sales tax revenue bonds — which has about $414 million in outstanding principal — from stable to negative.

“The outlook revisions reflect the unprecedented pressure facing the county from the rapid deterioration in the U.S. economy caused by public health and safety measures relating to the COVID-19 pandemic and the ensuing recession,” Blake Yocom, an S&P Global Ratings credit analyst, said in a statement announcing the outlook change.

“We view Cook County as having more exposure to the economic recession due to a high degree of economic sensitive revenues, high fixed costs, and health enterprise risk.”

The coronavirus pandemic has blown a hole in the Cook County budget. Early projections anticipate a shortfall of $200 million in revenue, largely from the county’s sales tax and other home rule taxes such as the hotel accommodations tax.

In a statement, a spokesman for Cook County Board President Toni Preckwinkle said, “there is economic uncertainty and financial strain being experienced by businesses and governments across the country during this crisis.”

“Cook County is still receiving investment grade ratings from all major rating agencies despite this public health and economic crisis, and we will continue responsibly managing the county’s finances and confronting our COVID-19 challenges.”

Cook County’s “large and underfunded” pension obligation prompted the S&P Global Ratings to lower the county’s general obligation bond rating one notch in January, from AA- to A+.

Because of that downgrade, the rating agency also lowered the county’s sales tax revenue bond rating from AA to AA-, while noting a stable outlook.

The ratings help determine the interest rates at which the county borrows money. The better the credit rating, the lower the interest rate.

Yocom said in his statement that “management’s ability to respond to the sharp declines in revenue” will be critical in maintaining credit quality at the ‘A+’ rating level.”