Press Release|Public Finance

KBRA Affirms Long-Term A Rating to the City of Chicago General Obligation Bonds; Outlook Positive

10 Nov 2023   |   New York


KBRA affirms the long-term rating of A with a Positive Outlook assigned to the City of Chicago General Obligation Bonds. The Positive Outlook recognizes the extensive nature of actions taken by the City’s management in confronting COVID-19 induced challenges, ongoing revenue improvement and enhanced financial stability, debt reduction, and strengthened pension funding. KBRA will continue to monitor the impact of the current inflationary environment, potential economic headwinds, and progress in achieving structural balance.

Key Credit Considerations

The rating was affirmed because of the following key credit considerations:

Credit Positives

  • Effective management team has reduced reliance on non-recurring revenues, and strengthened budgeting, forecasting and operational policies.
  • City’s substantial tax base and deep and diverse economic base commensurate with its position as the nation’s third largest city, and role as regional center for a large surrounding area.
  • Ample available reserve balances supplement General Fund reserves and liquidity position.

Credit Challenges

  • Need to identify significant long-term funding sources as pension funding transitions to an actuarial schedule.
  • Continued reliance on economically sensitive revenue sources pose ongoing budgetary uncertainty.
  • Slow bond amortization due to prior use of “scoop and toss” debt restructurings to augment operating resources.

Rating Sensitivities

For Upgrade

  • Lowered debt ratios, reflecting sustained moderation of borrowing by City and overlapping jurisdictions and continued resource base expansion.
  • Dedication of specific revenue sources to meet actuarial requirements for all four pension funds.

For Downgrade

  • Use of Chicago Skyway and parking meter asset and concession lease reserves to offset future budgetary gaps.
  • Failure to adhere to established financial and debt policies.
  • Inability to effectively accommodate actuarial pension funding requirements.

To access rating and relevant documents, click here.


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