Chicago Goes Under Review For Potential Bond Rating Downgrade By Moody's
By Stephen Gossett in News on Jul 7, 2017 10:32PM
All eyes were on the credit rating agencies this week after Moody's Investors Services warned that even if Illinois passed its budget, a downgrade to junk status for the state of Illinois could still be in the cards. But on Friday the agency made an announcement that could affect Chicagoans on a more micro level: Moody's Investors Service has placed the City of Chicago' general obligation under review, with the possibility of a downgrade.
Moody's said the review reflects Chicago's "close financial, political and governance" ties with the Chicago Board of Education. (As noted in today's announcement, Moody's just on Thursday put the Board of Education's B3 general obligation on review for a possible downgrade of its own.)
The agency wrote the following on Friday in its rating action, noting the Chicago Public Schools' up-in-the-fair fiscal state:
"Continued uncertainty surrounding the school district's financial situation in the wake of the state's own budgetary pressures and an indicated commitment from the city's administration to staving off further deterioration in the district's finances suggest the possibility of more direct intervention by the city in the district's fiscal affairs. The rating review will consider appropriation actions the state takes that may or may not address the school district's short-term liquidity needs and long-term budgetary hurdles."
The state budget package that cleared on Thursday after the House overrode Gov. Bruce Rauner's veto contains some added spending for schools in Illinois, though the funding mechanism is still awaiting action from Rauner. Also, the amount of money coming to CPS isn't entirely clear, and the raised taxes won't help the district right away either, according to the Sun-Times.
The review applies to $7.3 billion in Chicago's outstanding general obligation bonds, Moody's said.