Though still considered to be in the high quality category, Chicago's bond rating was downgraded Thursday from AA+ to AA.
Fitch Ratings cited the city's decline in tax revenue, use of reserve funds and underfunding of pension obligations as reasons for the downgrade on the city's $6.8 billion worth of outstanding general obligation bonds.
Bond ratings affect how much it costs for the city to borrow money. A lower rating, particularly if it’s followed by similar downgrades, could cost the city millions, Fran Spielman explains in the Chicago Sun-Times.
- Year end-audits disclosed last week by the Chicago Sun-Times showed that Daley closed the books on 2009 with just $2.7 million in the bank, having added $461 million to the mountain of debt piled on Chicago taxpayers.
The new borrowing brings Chicago’s total long-term debt to $16.9 billion. That’s $5,864 for every one of the city’s 2.9 million residents.
Just a decade ago, the debt load was $9.6 billion or $3,338-per-person.
The downgrade reflects the city’s weakened financial flexibility,” the report states and comes as the city faces a record,$654.7 million budget shortfall next year.
According to Fitch, rising costs for public safety and the continued slow economic recovery "will severely limit the city's ability to achieve structural balance in 2011."
The bond agency also contends Mayor Richard Daley's ability to make further expenditure cuts to personnel are "extremely limited."
Chicago's chief financial officer, Gene Saffold, could not be reached for comment on the downgrade.