City Bond Rating
17 January 2025
This week, the City received a downgrade from Standard & Poor’s (S&P), when they lowered their rating to 'BBB' from 'BBB+' on the city of Chicago's outstanding general obligation (GO) debt. While the Mayor argued this was due to “legacy issues” that are in part true due to our large debt and pension load, he ignored the fact that this 2025 budget failed to take on the structural changes we demanded and instead added more spending to the pile. S&P stated “The downgrade reflects our view that the 2025 budget leaves intact a sizable structural budgetary imbalance that we expect will make balancing the budget in 2026 and outyears more challenging," and the “rating action also reflects our view that following the 2025 budget negotiations, the city's practical options for raising new revenue appear less certain, as does the willingness of city leadership to cut spending, creating a level of uncertainty around its financial trajectory that is more appropriately reflected in the lower rating.”
Late last year, the Brandon Johnson Administration was pushing a deal that would have allowed them to borrow more to fund operating expenses this year, but we found a loophole and were able to block it on the council floor. I continue to have the same concerns as other finance experts looking at this latest bond issuance of $830 million, one day after the downgrade, with the same intentions of using the funds to pay for operating expenses including legal settlements that we moved away from years ago.
As many of us pointed out during the last budget, we need serious structural changes in our finances. While we have additional increases in property taxes coming from the new developer deals that forego paying their fair share of taxes, a CPS budget that could grow exponentially with a high probability of high interest loans being taken out to pay for the new CTU contract, and now the City borrowing at higher interest rates after a rating downgrade, it will be harder for taxpayers to sustain the tax load. The “sizeable structural budgetary imbalance” that S&P points out has to begin with the 5th floor making concessions on spending beyond our means and implementing structural changes in the 2026 budget. As part of opening these issues up for discussion, I’ve joined Ald. Beale in calling for hearings to investigate impacts of the City's credit downgrade to finances and borrowing costs.