NEW YORK–(BUSINESS WIRE)–#creditratingagency–KBRA assigns a long-term rating of A+ to the Unlimited Tax General Obligation Bonds (Dedicated Revenues), Series 2026 issued by Community College District Number 508, which does business as the City Colleges of Chicago. Proceeds of the Series 2026 Bonds will fund the construction, acquisition, and equipping of projects in the District’s capital improvement plan (CIP); capitalized interest through 2026; the premium for a Bond Insurance Policy; and various costs of issuance. The Outlook is Stable.
Unlimited Tax General Obligation (UTGO) Bonds (Dedicated Revenues), including the Series 2026 Bonds, are payable first from Student Tuition and Fee Revenues and State Grant Revenues (collectively “Pledged Revenues”) in amounts sufficient to provide 125% coverage of annual debt service. To the extent the Pledged Revenues are insufficient to pay debt service on the Bonds, the Bonds are payable from ad valorem taxes (“Pledged Taxes”) levied against all taxable property in the District without limitation as to rate or amount. The Indenture permits the District to abate the annual tax levy for debt service only if, and to the extent, Pledged Revenues on deposit in the Pledged Revenues account are sufficient to pay debt service. While Pledged Revenues are currently sufficient to meet the minimum required coverage level, and are projected to remain so, KBRA’s rating reflects the inherent strength of the UTGO backstop, which serves as the ultimate payment source for the UTGO Bonds in the event of a Pledged Revenues deficiency.
Key Credit Considerations
The rating action reflects the following key credit considerations:
Credit Positives
- Participation in the deep and diverse economy of Chicago, and its sizable tax base.
- Positive enrollment trends, with full-time equivalent (FTE) enrollment reaching a record level (21,485) in FY 2025.
Credit Challenges
- Material budgetary reliance on State support for operations, including pension on-behalf payments.
- Recent weakness in operating performance.
The Stable Outlook reflects KBRA’s expectation that District financial performance will remain at or near breakeven, supported by healthy enrollment and funding. The tax base and Chicago economy, in KBRA’s view, will provide credit stability at the current rating level should Pledged Revenues weaken and insufficiently cover UTGO debt service.
Rating Sensitivities
For Upgrade
- Continued enrollment growth resulting in improved operating performance, along with further tax base expansion.
For Downgrade
- Substantial economic or financial deterioration leading to sustained enrollment declines and prolonged, material operating deficits.
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Methodologies
- Public Finance: U.S. Local Government General Obligation Rating Methodology
- Public Finance: Private, Not-For-Profit U.S. Higher Education Rating Methodology
- ESG Global Rating Methodology
Disclosures
A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.
Information on the meaning of each rating category can be located here.
Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.
About KBRA
Kroll Bond Rating Agency, LLC (KBRA), one of the major credit rating agencies (CRA), is a full-service CRA registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan’s Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.
Doc ID: 1013818
Contacts
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