Ratings company S&P downgraded town of Chicago’s common obligation bond debt late Monday, citing the structural imbalance within the just-passed 2025 finances, restricted choices for brand new income sooner or later and an absence of willingness from metropolis management to chop the expense.
S&P analyst Scott Nees mentioned in a press release that Mayor Brandon Johnson’s 2025 finances left a “sizable structural finances imbalance that we anticipate will make balancing the finances in 2026 and subsequent years tougher.”
A downgrade is not only a reputational hit; it might additionally enhance town’s price to borrow cash for long-term tasks like Johnson’s $1.25 billion Construction and Development Bond, which is anticipated to hit the market early this yr.
The metropolis’s finance director, Jill Jaworski, disagreed with the downgrade and mentioned in a press release that the ranking doesn’t “precisely replicate the power of town’s credit score” or its potential to service giant money owed and obligations pensions.
S&P had put town on credit score watch in November, warning leaders to not abandon key long-term pension reform or rely too closely on one-off fixes to shut the finances hole. Although the mayor finally determined to keep up the supplementary pension coverage initiated by his predecessor Lori Lightfoot, directing $272 million to town’s pension funds, his total spending plan didn’t resolve town’s long-standing fiscal issues, the company concluded.
In the assertion, Johnson mentioned S&P’s choice “doesn’t precisely replicate our basic financial power and the steps we now have taken to handle previous issues.”
“My administration stays dedicated to working collaboratively with the City Council to realize structural stability and strengthen Chicago’s monetary future,” he mentioned within the assertion.
He cited quite a lot of main tasks such because the quantum computing campus on town’s South Side, new improvement surrounding the United Center and the growth of the CTA Red Line.
“We will meet these challenges head on, simply as Chicago all the time has, and interact with all stakeholders to create sustainable insurance policies that replicate our shared dedication to progress and duty,” Johnson mentioned within the launch.
The BBB ranking means town has “ample potential to satisfy monetary obligations,” in response to S&P, however that the company considers town extra inclined to “opposed financial situations.”
BBB is one step above the bottom funding grade, BBB-, which remains to be one degree above junk.
Johnson’s finances director, Annette Guzman, has mentioned structural reforms to town’s finances will take time, and final month she spoke out towards a downgrade.
Shortly after the finances handed, scores company Fitch and different monetary specialists credited town with sustaining the additional funds to maintain its pension funds afloat. They additionally famous that town stuffed a good portion of the 2025 finances hole – about 30% – with one-time income.
One of the opposite main ranking companies, Moody’s, didn’t change its ranking of town after the finances was authorised, sustaining its ranking at Baa3+, one step above junk.
The finances “on stability doesn’t materially change town’s credit score trajectory,” Moody’s Vice President David Levett mentioned in a press release in late December. “The fiscal 2025 finances favorably continues the substantial enchancment of the City’s pension funding practices. Increasing town’s pension funding ranges has been a key issue within the enchancment of its credit score profile.”
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