[KeyLargo]

Chicago’s triple-notch credit downgrade

7/18/2013

Ted Dabrowski
Vice President of Policy

The city’s out-of-control pension liabilities and “accelerating budget pressures associated with those liabilities” has resulted in another credit downgrade by Moody’s Investors Service.

The national credit rating agency downgraded the city’s nearly $8 billion in general obligation bonds to A3 from Aa3. This is a triple-notch downgrade.

Chicago is now just four notches above junk-bond status – any further downgrades mean the city is likely to face problems borrowing money.

The agency made good on its April 2013 promise to evaluate state and local pension plans on more realistic assumptions. At that time, Moody’s placed 29 local governments under review – including Chicago.

The rating agency has long critiqued pension funds’ use of overly ambitious investment return targets that allow funds to understate their true pension shortfalls.

Based on the new Moody’s methodology, which uses more conservative assumptions, Chicago’s 2012 pension shortfall jumps nearly 90 percent, to $36 billion from $19 billion.

http://illinoispolicy.org/blog/blog.asp?ArticleSource=6112

[griswold3]

‘any further downgrades mean the city is likely to face problems borrowing money’
Ain’t gonna happen. Patronage, my FRiend, patronage