Citing economy, pension worries, Fitch downgrades Chicago

Chicago downgraded by Fitch
Chicago downgraded by Fitch

Fitch Ratings cut Chicago's bond ratings on Friday, citing the city's sluggish economy and its inability to find a solution to its union pension obligations.

The credit ratings agency said it downgraded $8 billion in Chicago's unlimited tax general obligation (ULTGO) bonds to A- from AA-. It also cut $497.3 million sales tax bonds to A- from AA-, and downgraded $200 million commercial paper notes, 2002 program series A (tax exempt) and B (taxable) to BBB from A.

Fitch said its rating outlook on the city's securities is "negative."

Chicago Bulls' Michael Jordan auctions home
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The ratings agency said the downgrade reflects a lack of meaningful solutions to both its near-term and long-term obligations.

"The city has been unsuccessful in its attempts to negotiate a solution with labor unions and lobby the state legislature, which ultimately controls the benefit formula," Fitch said in a statement.

The company also said that while the city has good prospects for long-term economic stability, if not growth, but high unemployment and the recovery of its property tax base remain a continuing problem.

(Read more: 'Extreme commuting' costs getting out of control)


This story has been updated to reflect the correct date of the downgrade.