Chicago, the third-most-populous U.S. city, had its credit rating lowered three steps on more than $8 billion of debt by Fitch Ratings, which cited the city’s growing unfunded pension liability.
Fitch cut the rating on $8 billion of Chicago’s general-obligation bonds to A- from AA-, the New York-based company said today in a statement. It also took the same action on $500 million of debt backed by the Windy City’s sales taxes.
It’s the second three-step rating cut for Chicago since July, when Moody’s Investors Service lowered its grade to A3, the fourth-lowest investment-quality category, citing pension burdens and the costs of crime. Mayor Rahm Emanuel, a 53-year-old Democrat, has proposed raising the city’s cigarette sales tax by 75 cents a pack to help close a deficit of $339 million.
Chicago, a city of more than 2.7 million residents, is projecting a budget deficit of as much as $1 billion in 2015 unless the Illinois legislature restructures the public-pension system, which is a state creation. Lawmakers adjourned their fall session yesterday without taking any action.
Sarah Hamilton, a spokeswoman for the mayor, didn’t immediately respond to an e-mail seeking comment on the Fitch downgrade sent after normal business hours.