KBRA Revises Outlook to Positive for Chicago Transit Authority, IL Sales Tax Receipts Revenue Bonds, Affirms Long-Term AA Rating on Sales Tax Receipts Revenue Bonds and AA- Rating on Second Lien Sales Tax Receipts Revenue Bonds
9 Dec 2025 | New York
KBRA affirms the long-term AA rating for Chicago Transit Authority, IL (CTA) outstanding Sales Tax Receipts Revenue Bonds and the long-term AA- rating for CTA's outstanding Second Lien Sales Tax Receipts Revenue Bonds (collectively the Sales Tax Bonds). KBRA revises the Outlook on both liens to Positive from Stable.
The revision of the Outlook to Positive reflects the Illinois legislature’s recent approval of Senate Bill 2111 (SB 2111), which materially increases operating and capital funding for the Regional Transportation Authority (RTA) and the three Service Boards it oversees: CTA, METRA (regional commuter rail system), and PACE (suburban bus system), (collectively the Service Boards). CTA estimates it will receive over $500 million in additional Pledged Sales Tax Receipts annually beginning in the second half of FY 2026 (partial year) which should not only address the anticipated FY 2026 operating shortfall, relieving pressure to implement significant service reductions, but meaningfully improve future debt service coverage metrics.
Upward migration of the rating in the two-year Outlook window is dependent on the successful implementation of SB 2111 and the achievement of expected revenue gains; the working relationship between the Service Boards and the newly created Northern Illinois Transit Authority (NITA), which replaces the RTA under SB 2111; the magnitude and timing of additional debt associated with the CTA’s planned Red Line Extension; and further anticipated improvement in the already sound level of debt service coverage on CTA’s Sales Tax Bonds.
The long-term ratings reflect currently solid debt service coverage provided by highly resilient, pledged Sales Tax Receipts derived from one of the broadest regional tax bases in the nation. The ratings also reflect the essentiality of transit to the greater Chicago economy.
Key Credit Considerations
The rating actions reflect the following key credit considerations:
Credit Positives
- Pledged Sales Tax Receipts, strengthened by the recent passage of Senate Bill 2111, are derived from a broad-based sales and use tax levied within the economically diverse Chicago metropolitan area and demonstrate an established long-term growth trend with minimal volatility.
- Strong additional bonds test provisions (2.0x for the First Lien and 1.50x for the Second Lien) and reliance on residual Sales Tax Receipts to support operations provide sound protection against over-leveraging.
- The essentiality of CTA mass transit services to the metropolitan area’s economy results in consistent support from non-operating funds to maintain service levels.
Credit Challenges
- The aggregate 10.50% rate of combined state, county, city and RTA sales tax within the City (including the proposed 0.25% increase in the RTA sales tax) is among the nation’s highest, leaving little flexibility for an increase.
- CTA maintains a significant capital program including the Red Line extension, entailing the expected issuance of additional debt.
Rating Sensitivities
For Upgrade:
- Significant, sustained improvement in debt service coverage resulting from increased or additional pledged revenues or a material decrease in outstanding debt.
For Downgrade:
- Decline in pledged revenues resulting in a material decrease in debt service coverage.
- Increase in debt resulting in a material decrease in debt service coverage.
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