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."
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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.
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Correction:
This story has been updated to reflect the correct date of the downgrade.
—By CNBC