Fitch Rates Chicago Park District, Illinois' $193MM GOs 'AA'.

CHICAGO -- Fitch Ratings has assigned an 'AA' rating to the following Chicago Park District, Illinois' (the district) issues:

--$35 million general obligation (GO) limited tax park bonds, series 2006A;

--Approximately $35 million GO limited tax refunding bonds, series 2006B;

--Approximately $55 million GO unlimited tax refunding bonds, series 2006C;

--Approximately $68 million GO unlimited tax refunding bonds, series 2006D (personal property replacement tax alternate revenue source).

Fitch also affirms the 'AA' rating on the district's approximately $1 billion outstanding GO debt. The Rating Outlook is Stable. The bonds are expected to sell on or about Dec. 14 in a negotiated offering led by J.P. Morgan Securities Inc. and Lehman Brothers. The bonds are secured by the district's full faith and credit pledge. Series 2006A proceeds will finance the district's annual capital plan, while series 2006B, 2006C, and 2006D will refinance outstanding debt.

The 'AA' rating reflects the district's continued success in implementing operational efficiencies. Management has instituted several cost-saving measures, including the privatization of noncore functions, and continues to diversify nontax revenue sources. These initiatives have produced improved financial operations, as evidenced by decreasing operating costs and revenue growth with limited increases in the property tax levy. The rating also reflects Chicago's broad economy and substantial tax base (the park district is coterminous with the city) as well as the park district's manageable debt burden.

Although the district's financial performance has reflected balanced operations, the implementation of Government Accounting Standards Board statements Nos. 33 and 34 in fiscal 2002 (Dec. 31 year-end) led to a reduction in the beginning general fund balance to negative $32.1 million, from positive $58.1 million. The change reflects the deferral of property taxes previously recognized on a budgetary basis.

With the change in revenue recognition and weaker personal property replacement tax collections, the 2002 fiscal year produced an ending balance of negative $70.4 million (negative 20%). In response, the district reduced discretionary spending and limited salary and wage increases. Consequently, the district generated a small surplus in 2003, which increased the general fund ending balance to negative $65.7 million (negative 19%). While the district balances its operations on a budgetary basis, the tax revenue collection period is not congruent with the fiscal period, and generally accepted accounting principles require conservative tax revenue treatment.

In 2004, the district's working cash fund balance of $77 million was included in the general fund to more accurately reflect its operational use, resulting in a positive 2004 general fund balance of $3.0 million (1.1% of spending). Fiscal 2005 estimates indicate renewed growth in the personal property replacement tax and should produce a small surplus, while the 2006 budget is balanced.

The debt burden is moderate but manageable, direct debt is $363 per capita, and overall debt is $4,561 per capita or 5% of property market values. The park district's annual capital spending peaked in 2001 at $169 million, compared with $71.7 million in 1999. Borrowing has declined to a steady pace of $30 million-$40 million in the past three years and is anticipated to remain at the same level through 2010.

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