Chicago’s Bond Rating Falls to BBB, Just Above Junk Status

Chicago’s bond rating has dropped to BBB, raising concerns about future borrowing costs and financial stability.

Chicago’s Bond Rating Falls to BBB, Just Above Junk Status
Chicago’s Bond Rating Falls to BBB, Just Above Junk Status

Chicago: So, it looks like Chicago’s bond rating just took a hit. A couple of months back, a Wall Street agency warned that there was a good chance this would happen. And guess what? They were right.

Standard & Poor’s pointed out that the city relies too much on one-time revenue and is stuck in a political standoff between Mayor Brandon Johnson and the City Council. They finally approved a budget, but it didn’t include a property tax increase, which is a big deal.

Now, Chicago’s bond rating has dropped from BBB+ to BBB. Anything below BBB- is considered junk status, which is not great news. This downgrade could cost taxpayers millions over the next 40 years, especially with a big bond issue coming up for housing and economic development.

In their announcement, S&P mentioned that the budget still has a significant structural imbalance, making it harder to balance in the future. The City Council’s refusal to raise property taxes means finding new revenue sources is looking pretty uncertain.

S&P also noted that the city leadership’s willingness to cut spending is reflected in this lower rating. The Council had previously shot down Johnson’s request for a $300 million property tax increase, which shows the tension between him and the Council.

Despite the downgrade, S&P gave Chicago a “stable” outlook, expecting the city to maintain strong reserves and keep making pension payments. Johnson, however, pushed back, saying the report doesn’t fully capture the city’s economic strength and the steps they’re taking to fix past issues.

He’s committed to working with the City Council to tackle these financial challenges. The city is also looking at new ways to generate revenue, like adding taxes on streaming services and raising fees for various permits.

They’re even planning to add more speed cameras to catch drivers and bring in some extra cash. The budget cuts include job reductions and some efficiency measures, but it’s clear that Chicago has a long road ahead to get its finances in order.

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