Thread: MOODY’S DOWNGRADES CHICAGO CREDIT RATING TO JUNK BONDS STATUS

It appears that the piper has arrived in Chicago and it is time to pay him.

MOODY’S DOWNGRADES CHICAGO CREDIT RATING TO JUNK BONDS STATUS



AP Photo/Charles Rex Arbogast

by BREITBART NEWS12 May 2015116

CHICAGO (AP) — Moody’s Investors Service announced Tuesday it has lowered Chicago’s credit rating to junk bond status, citing unfunded pension obligations and lagging tax revenue, in a move Mayor Rahm Emanuel called irresponsible.

Moody’s downgraded the city’s debt rating on bond issues backed by property, sales and fuel tax revenue to Ba1, one notch below investment grade, from Baa2. As a result, the city’s borrowing costs will increase as it pays more interest to make its bonds attractive to buyers.

In making the announcement, Moody’s noted the city’s options for curbing growth in its unfunded pension liabilities was hurt by an Illinois Supreme Court decision. The court ruled Friday that the Legislature’s restructuring of Illinois’ pension obligations violated a section of the state constitution.

“Whether or not the current statutes that govern Chicago’s pension plans stand, we expect the costs of servicing Chicago’s unfunded liabilities will grow, placing significant strain on the city’s financial operations absent commensurate growth in revenue and/or reductions in other expenditures,” according to Moody’s.

Emanuel said Moody’s is out of step with other rating agencies and ignores the city’s progress in dealing with its financial liabilities. He also contended Moody’s was trying to force the city to raise taxes.

“While Chicago’s financial crisis is very real and at our doorsteps, today’s irresponsible decision by Moody’s to downgrade the city’s credit by two steps goes far beyond that reality,” Emanuel said in a statement. “Their decision was driven solely by the overturning of a state pension bill that did not include Chicago’s pension reform, yet they did not downgrade the state of Illinois.”

Emanuel has maintained pension changes he engineered for the workers and laborers fund can withstand legal challenges.

The city faces a shortfall of about $20 billion in its four pension plans and a mandate to make the police and fire pensions financially sound in coming years. The Chicago Board of Education also faces large pension liabilities.

http://www.breitbart.com/big-governm...-bonds-status/

Following City, Chicago Public Schools Credit Rating Junked

May 13, 2015 4:30 PM



Chicago Public Schools Headquarters. (Credit: CBS)


John Dodge

CHICAGO (CBS) — One day after the city of Chicago took a big hit to its credit rating, a leading bond-rating agency further downgraded the Chicago Public Schools debt to “junk” status.

The Moody’s Investor Service applied the Ba3 rating to the Chicago Board of Education’s $6.2 billion in debt.

Like the city, CPS is facing a huge problem with increasing required contributions to teachers’ pensions.

“The Ba3 rating reflects CPS’s steadily escalating pension contributions and use of reserves to fund those contributions,” Moody’s said. “We believe pension costs will place increasing strain on the district’s precarious financial position absent material revenue growth or expenditure reduction, both of which appear increasingly difficult for the district to achieve.”
The rating means the school system’s ability to pay off its debt is at risk. It also means it will cost more for CPS to borrow in the future.

On Tuesday, the city of Chicago’s bond rating was also downgraded to “junk” status.

According to Moody’s, the district’s net annual pension contribution will increase by 6 percent this year. In fiscal 2015, the district’s mandatory net annual pension contribution totals $635 million.

Further increases are scheduled in future years.

Moody’s also downgraded the credit rating for the Chicago Park District.

“The downgrade is an example of how the rating agencies work in concert with bond holders in pushing our city and schools to the brink by recklessly increasing termination fees and costs of borrowing. Today’s action by Moody’s induces further political panic to force the City to implement even more misguided fiscal decisions that will hurt our students and public schools,” said teachers’ union spokeswoman Stephanie Gadlin.

http://chicago.cbslocal.com/2015/05/...rating-junked/