Post by Logan on Mar 28, 2016 20:38:22 GMT -6
Chicago had its credit rating cut to the lowest investment grade by Fitch Ratings after the Illinois Supreme Court tossed out Mayor Rahm Emanuel's plan for dealing with the mounting debt to its workers' pension plans.
The two-step downgrade on Monday to BBB-, one rank above junk, affected $9.8 billion of general-obligation bonds and $486 million of debt backed by sales taxes. The company said the outlook is negative, indicating that the rating could be lowered further.
The step follows the March 24 decision by the state's top court to strike down Emanuel's plan, which required the city and employees to boost contributions to the municipal and laborers retirement funds and cut future cost-of-living increases. The court ruled that it violated safeguards to public pensions enshrined in Illinois's constitution, illustrating the difficulty Chicago faces in reducing a $20 billion shortfall in its retirement funds.
"Last week's Illinois Supreme Court ruling striking down pension reform legislation for two of the city of Chicago's four pension plans was among the worst of the possible outcomes for the city's credit quality," Fitch said in an e-mailed statement. "Not only did it strike down the pension reform legislation in its entirety, but it made clear that the city bears responsibility to fund the promised pension benefits, even if the pension funds become insolvent."
Read more: www.chicagotribune.com/business/ct-fitch-rating-chicago-20160328-story.html
The two-step downgrade on Monday to BBB-, one rank above junk, affected $9.8 billion of general-obligation bonds and $486 million of debt backed by sales taxes. The company said the outlook is negative, indicating that the rating could be lowered further.
The step follows the March 24 decision by the state's top court to strike down Emanuel's plan, which required the city and employees to boost contributions to the municipal and laborers retirement funds and cut future cost-of-living increases. The court ruled that it violated safeguards to public pensions enshrined in Illinois's constitution, illustrating the difficulty Chicago faces in reducing a $20 billion shortfall in its retirement funds.
"Last week's Illinois Supreme Court ruling striking down pension reform legislation for two of the city of Chicago's four pension plans was among the worst of the possible outcomes for the city's credit quality," Fitch said in an e-mailed statement. "Not only did it strike down the pension reform legislation in its entirety, but it made clear that the city bears responsibility to fund the promised pension benefits, even if the pension funds become insolvent."
Read more: www.chicagotribune.com/business/ct-fitch-rating-chicago-20160328-story.html