The credit ratings agency said it downgraded $8 billion in Chicago’s unlimited tax general obligation (ULTGO) bonds to A- from AA-. It also cut $497.3 million sales tax bonds to A- from AA-, and downgraded $200 million commercial paper notes, 2002 program series A (tax exempt) and B (taxable) to BBB from A.Fitch said its rating outlook on the city’s securities is “negative.”…“The city has been unsuccessful in its attempts to negotiate a solution with labor unions and lobby the state legislature, which ultimately controls the benefit formula,” Fitch said in a statement.
Moody’s has pegged Chicago’s pension obligation at nearly $87 billion, or $84,000 per household—nearly double the city’s average household income. It’s not easy to see how a city can possibly function normally under that kind of burden.Worse, Fitch is reacting not just to liabilities as they stand but to the city’s complete lack of initiative to reform—and sclerosis is even worse at the state level. At this point, it’s hard to imagine what would finally shock public officials into action, to hammer out a way to ease the strain on taxpayers while blunting the impact on retirees. For now, at least, the can-kicking and heel-dragging continues.[Image of Chicago skyline courtesy of Shutterstock]