Finance Department's Work Gains Solid Bond Rating for Lake Zurich

The village of Lake Zurich’s finance department has maintained a solid bond rating, saved taxpayers more than $270,000 and recently received an award for excellence in financial reporting.

At the end of March, Standard and Poor’s (S&P) gave the village a bond rating of AA stable, which is considered to be a solid rating in this economy and is a higher rating for the village than just three years ago, said Al Zochowski, finance director.

“In spite of the economy, we have maintained this rating and not all communities have been able to do that,” said Suzanne Branding, village president.

“The local economy, the tax base and local government operations are considered to be stable,” Branding added.

“The rating from S&P is related to a board vote on Feb. 22 to approve the refunding of the 2002 and 2002A bonds,” said Zochowski.

Zochowski said the bond refunding demonstrated to S&P the village’s ability to repay debt, and confirmed the village’s rating was still satisfactory.

“One area where we can improve and move toward a AAA rating is related to debt policy,” said Zochowski.

“We do not have an adopted debt policy, and sometime in the near future, we need to adopt a policy of when and how we will issue debt,” said Zochowski. “Once that is approved, I think S&P will say that all of our financial policies meet their standards.”

The village recently refunded two bonds; the 2002 taxable bonds and 2002A non taxable bonds, which netted savings of more than $270,000 over the next nine years.

The amount of savings takes into account attorney, brokers and financial advisor fees.   

Zochowski likened the selling of bonds and the resulting AA stable rating from S&P to refinancing your home.

“The first thing the finance company does is check your credit rating; if it is 500 they will tell you to look somewhere else, 600 they will take the risk, but charge you a higher rate,” said Zochowski.

“If you have a 700 credit rating, you are pretty good, but not good enough, and for those with a score of 750 and above; they get the lowest rates possible,” Zochowski said.

Zochowski said the process is similar in government. Interest is lower in the first few years, and the longer the loan, the more interest you pay.  

“The village is refinancing the last ten years of the bonds; we are paying less than 4 percent in total when we could have been as high as 6 percent, we are saving the interest that we would have been paying on,” Zochowski said.  

“We delivered on what we committed to do with S&P; that provides savings on interest rates attributed to our bonds for current and future debt,” said Bob Vitas, village administrator.

“That savings is passed on to everyone in the village,” Vitas added.

The bond transfer will occur on Thursday, April 21.

Additionally, Maria Forrest, the village's assistant finance director, received an award for excellence in financial reporting.

The Government Finance Officers Organization of the United States and Canada (GFOA) awarded Forrest the Certificate of Achievement for Excellence in Financial Reporting.

The achievement was given based on the Comprehensive Annual Financial Report (CAFR), and is the highest form of recognition of government accounting and financial reporting, said Branding.

Branding said the report is judged by an impartial panel which determines if GFOA standards are met.

“The award highlights a constructive spirit of full disclosure that clearly communicates the government body’s financial story,” Branding said.

“The award (also) says our financial statements have no material misstatements, and are prepared with generally accepted accounting principles,” said Zochowski.

For more than 25 years, the village has received the certificate of excellence in financial reporting. 

“The award bodes well for the village of Lake Zurich and its financial reporting; Maria Forrest has done an outstanding job in continuing the tradition of excellence in reporting, it is a credit to the entire finance dept,” said Vitas.

“Maria has added a new layer of professionalism to the finance staff, helping us make positive changes we couldn’t make in the past because we didn’t have the right talent,” said Zochowski.

“She is very diligent and very good at her job,” said Zochowski.

Forrest has been employed by the village for more than two years, and has an MBA from Northern Illinois University.

The GFOA is a non-profit, professional association that serves 17,500 government finance professionals.