Standard & Poor’s lowers city’s outlook to ‘negative’
BY FRAN SPIELMAN City Hall Reporter September 16, 2013 4:42PM
Updated: October 18, 2013 6:20AM
Chicago’s looming pension crisis — and the $1 billion shortfall it creates in 2015 — has prompted Standard & Poor’s to change from stable to negative the outlook on Chicago’s A-plus general obligation bond rating.
In mid-July, Moody’s Investors ordered an unprecedented triple-drop in the city’s bond rating, citing Chicago’s “very large and growing” pension liabilities, “significant” debt service payments, “unrelenting public safety demands” and historic reluctance to raise local taxes that has continued under Mayor Rahm Emanuel.
Now, Standard & Poor’s has cited those same factors for its negative outlook on Chicago’s A-plus rating.
“The outlook change reflects our view of the risks involved in how the city will address its upcoming large pension payments,” S&P credit analyst Helen Samuelson was quoted as saying in a statement released late Friday.
Like Moody’s, Standard & Poor’s cited Chicago’s $19.4 billion pension crisis, the city’s mountain of debt, and its historic “reluctance to adjust taxes” despite its sweeping home-rule powers and diverse economy.
Emanuel took the latest Wall Street hit in stride by essentially saying, “I told you so” about the city’s financial cliff.
“Mayor Emanuel has said for more than a year that without comprehensive pension relief from Springfield, municipalities such as Chicago would continue to receive negative reviews from rating agencies,” Kelley Quinn, a spokesperson for the city’s Office of Budget and Management, said in an emailed statement.
“We have made significant strides over the past two years, but all of the hard work will be for nothing without pension reform. [Emanuel] urges leaders in Springfield to come together and find a common ground that will provide the much-needed relief that will give taxpayers, retirees, residents and rating agencies confidence in Chicago’s finances as well as its future.”
In 2015, the city is required by state law to make a $600 million contribution to stabilize police and fire pension funds that now have assets to cover just 30.5 and 25 percent of their respective liabilities.
The mayor’s City Council floor leader has suggested that the Illinois General Assembly “relieve us of these artificial dates they’ve put on us and allow us to solve the pension problem over time.”
A seven-year “ramp up” was built into a tentative contract with police sergeants but roundly rejected by the rank and file.
But if Springfield refuses to lift the hammer hanging over the heads of Chicago taxpayers, the $338.7 million shortfall in the city’s 2014 budget will seem like the good old days.
The deficit will rise to $994.7 million in 2015 and $1.15 billion in 2016 without a painful mix of employee concessions and new revenues, according to the city’s own annual financial analysis.
Budget Director Alex Holt has said the mayor will not raise sales or property taxes to close a $338.7 million gap in next year’s budget, but all bets are off in 2015.