Moody's drops Chicago's credit rating three slots down to A3

Illinois Review reports:

Wednesday, Moody's slashed Chicago's credit rating down by three slots to A3, just a step above the triple-B rating. Crain's reports Chicago's obligations were a key reason for the downgrade:

With $8.2 billion of debt, Chicago was the biggest debt issuer reviewed by Moody's, which attributed the downgrade announced July 17 to the city's "very large and growing pension liabilities and accelerating budget pressures associated with those liabilities." The rating agency also put a negative outlook on the lower rating, saying the city faces formidable legal and political challenges to enacting pension reforms.

Chicago's pension payment is slated to jump by nearly $590 million to a projected $1.07 billion in 2015 under current Illinois law and the city needs state legislative action to change pension benefits in order to reduce costs.

Tim Blake, a Moody's analyst, said the action on Chicago's rating led to downgrades of ratings for Cook County, the Cook County Forest Preserve District, the Chicago Park District, the Chicago Public Schools and the Metropolitan Water Reclamation District partly because they share the same tax base with Chicago.

"There was the issue of overlapping (pension and debt) burdens on taxpayers," he said. "We feel the overlapping is heavier than anywhere else."

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