Chicago Debt Downgraded to Junk Status By Moody’s; Firm Cites Pension Ruling

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Moody’s has cut Chicago’s credit rating to Ba1 – or junk status – in the wake of last week’s Supreme Court ruling, which the ratings agency says “considerably” narrows Chicago’s options for dealing with pension liabilities.

[Read the Moody’s release here.]

More from Crain’s Chicago:

Moody’s downgrade comes even before a ruling by a Cook County Circuit judge in a case challenging a separate state law overhauling two city pension funds that was passed in 2013.

“Whether or not the current statutes that govern Chicago’s pension plans stand, we expect the costs of servicing Chicago’s unfunded liabilities will grow, placing significant strain on the city’s financial operations absent commensurate growth in revenue and/or reductions in other expenditures,” the Moody’s report says.

“The magnitude of the budget adjustments that will be required of the city are significant,” Moody’s added. “Furthermore, Chicago’s tax base is highly leveraged by the debt and unfunded pension obligations of the city, as well as those of overlapping governments.”

In a statement, Emanuel said, “This action by Moody’s is not only premature, but it is irresponsible to play politics with Chicago’s financial future by pushing the city to increase taxes on residents without reform.”

The city’s credit outlook remains negative.

 

Photo by bitsorf via Flickr CC LIcense

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