LW 210 Bond Rating Plunges, Hovers Near 'Junk' Status

Lincoln-Way District 210's woes continued Friday, with the announcement that its bond rating has taken a serious hit—down five notches, teetering just one above "Junk" status.

Moody's Investor Service said the downgrade "reflects the weakened financial position of the district, which has necessitated the issuance of tax anticipation warrants ... to support operations.

"The rating also considers the recent discovery of misappropriation of bond proceeds and restricted funds, the resolution of which will exacerbate the district's budget pressures."

Moody's also saddled the district with a negative outlook, which "reflects the likelihood that the district's financial position will continue to narrow in fiscal 2016 and beyond.

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"District management is pursuing the closure of one of its four high schools in order to achieve savings, but this solution has met considerable public opposition," Moody's said in a release.

The outlook was also impacted by the district's "elevated debt burden and debt service costs, which are expected to rise considerably in fiscal 2021."

The district is not surprised by the change in rating, Community Relations Director Taryn Atwell commented to the Chicago Tribune, noting that it can be attributed "in part to the district issuance of $30 million in tax anticipation warrants."

The rating drop pulls yet another brick from LW 210's already wobbly financial status. The district's position on the state's Financial Watch List, and the board's decision to close Lincoln-Way North—a school less than a decade old—have incited a community to action, including a lawsuit to attempt to prevent the school's closing. As the closing looms, parents and residents continue to demand better transparency from the board, specifically regarding finances and accounting.

Recent revelations showed $10 million in bond funds from 2009 earmarked for the capital projects funds were "incorrectly" deposited into the district's life safety fund. And $1.2 million of interest income from the 2006 and 2007 bonds was also mishandled during fund transfer, Chicago Tribune reports. An approximate $4.6 million was "expended for noncapital purposes through journal entries without board knowledge or approval.

"It is apparent that a proper system of checks and balances was not in place, and that the previous superintendent took unauthorized action; for this, we take responsibility," the district said in a recent statement. "This board was presented with annual audits giving the district a financial 'clean bill of health' for years."

Meanwhile, the board seeks to fill a vacancy, following the resignation of yet another member. Longtime board member Arvid Johnson last week became the third to resign this year; former board president Kevin Molloy and former board member Christopher McFadden have also abandoned their seats.

Anyone seeking to take over Johnson's post is encouraged to apply by May 9.