NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) continues to monitor crucial credit issues revolving around the City of Chicago’s general obligation rating, including pension challenges which remain unresolved. The Cook County Circuit Court ruling on July 24, 2015 that Municipal and Laborers’ 2014 legislated pension reforms were unconstitutional was an outcome we had considered. KBRA expects ultimate resolution from the Illinois Supreme Court when the case is heard later this year. KBRA is also following Police and Fire pension funding legislation that was approved by the Illinois General Assembly in June 2015, but has not been signed into law by the Governor. This legislation extends the time needed to reach a 90% funded ratio from 2040 to 2055, and establishes a transitional ramp-up to the full required annual funding requirement. As it now stands, the City’s property tax levy contribution would have to increase by approximately $539 million, if not offset by other revenue and expenditure actions. The legislation would reduce the City’s immediate contribution requirement by a reported $200 million. The City’s fiscal year 2016 budget is scheduled to be released in September 2015, one month earlier than in prior years. KBRA expects the document to outline revenue and/or expenditure actions to address the Police and Fire pension spike, as well as other critical budgetary issues. Failure to confront these issues in a fiscally responsible manner may result in a rating action.
For additional information, please see our Local General Obligation Rating Report City of Chicago General Obligation Bonds, Series 2015 A&B, published on July 7, 2015.
With respect to the Board of Education of the City of Chicago, please see Kroll Bond Rating Agency Places Rating for Board of Education of the City of Chicago, IL General Obligation Bonds on Watch Downgrade, dated July 7, 2015. KBRA will review the Board’s fiscal year 2016 budget when released at the end of August.
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KBRA is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (NRSRO). In addition, KBRA is recognized by the National Association of Insurance Commissioners (NAIC) as a Credit Rating Provider (CRP).