Chicago received a credit boost Thursday from Fitch Ratings, which upgraded its general obligation rating to BBB-plus from BBB, due to a decline in the city's long-term liability burden stemming from steady growth in the economic resource base and improved debt management practices.
The rating agency also raised the rating on sales tax securitization bonds to AA-plus from AA, based on the GO upgrade.
Fitch said Chicago's GO rating remains "well below" the sector median, citing the city's "constrained expenditure profile given the heavily unionized nature of its workforce and exceptionally high carrying costs for debt and pensions, a history of sizable budget gaps and dependence on one-time gap closing measures, and a revenue base highly sensitive to economic setbacks."
"Rating strengths center on Chicago's strong gap-closing capacity and financial resilience, anchored by its high reserves and broad revenue raising authority, and its role as the economic hub for the Midwestern region of the U.S.," Fitch said.
Mayor Brandon Johnson said rating upgrades received over the past year reaffirm the city's fiscal stability.
"The ratings not only prove the excellence of our city's operational and financial management, but also confirm that we have the ability to attract additional investment, boost economic vitality, and further strengthen our city's finances," he said in a statement.
The Fitch upgrades come as the nation's third-largest city forecasted a $538 million gap in its upcoming fiscal 2024 budget. Johnson last week proposed a
A major driver of the current gap is $150 million to cover migrant costs, Fitch said. Texas Gov. Greg Abbott, who has been busing migrants crossing the U.S. border with Mexico to select cities, reported this week that Chicago has received more than 16,100 people, the second largest amount after New York City.
Fitch, which dropped
The higher ratings came as Chicago moved toward structural balance and implemented a policy of supplemental pension payments although its
"The depth of the city's pension liability and its consumption of operating resources continues to constrain the city's overall creditworthiness, notwithstanding notable progress including the extension of depletion dates and funding at or above statutory levels," Fitch said.
Chicago had $5.78 billion of GO bonds and nearly $4.61 billion of sales tax securitization bonds outstanding at the end of fiscal 2022, according to the city's