KBRA Assigns Long-Term Rating of A to the City of Chicago General Obligation Bonds, Series 2024A; Outlook Revised to Stable from Positive
2024年7月30日 - 3:31AM
ビジネスワイヤ(英語)
KBRA assigns a long-term rating of A to the City of Chicago
General Obligation Bonds, Series 2024A. The Outlook has been
revised to Stable from Positive.
Concurrently, KBRA affirms the long-term rating of A on the City
of Chicago’s outstanding General Obligation Bonds and revises the
Outlook to Stable from Positive. The Outlook revision reflects
increased uncertainties with respect to the impact of more recent
budgetary pressures that have been exacerbated by asylum seeker
spending needs, sharply elevated fixed costs, depletion of COVID
era federal recovery funds and the likelihood of increased pension
liabilities due to Tier 2 and Tier 3 adjustments. The revenue base
relies on economically sensitive sources, and while several revenue
enhancement options are under consideration, action remains to be
taken. Overall, progress toward structural balance has not kept
pace with KBRA’s expectations, and sizable out-year gaps remain to
be closed.
The long-term rating continues to reflect the City’s deep and
diverse economy, a favorable track record of enacting appropriate
budgetary actions, and an improved revenue environment, all of
which have contributed to closure of annual budget gaps, albeit
with continued use of non-recurring revenue sources. The City’s
high fixed cost burden, attributable to debt and pension funding
requirements, may potentially crowd out future spending for other
governmental responsibilities, although KBRA acknowledges progress
in addressing severe pension funding deficiencies.
Key Credit Considerations
Credit Positives
- The City’s substantial tax base and deep, diverse economic base
reflect its position as the nation’s third largest city, and its
role as a regional center for a large surrounding area.
- Management structure and policies provide a supportive
framework for managing debt and financial operations.
- Ample available reserve balances supplement General Fund
reserves and liquidity position.
Credit Challenges
- There is a need to identify significant long-term funding
sources, as pension funding is now on an actuarial schedule and the
increasing fixed asset burden risks crowding out other
spending.
- Continued reliance on economically sensitive revenue sources
poses ongoing budgetary uncertainty.
- Slow bond amortization due to prior use of "scoop and toss"
debt restructurings to augment operating resources.
Rating Sensitivities
For Upgrade
- Dedication of specific revenue sources to meet actuarial
pension requirements for all four pension funds.
- Improved debt ratios, reflecting sustained modernization of
borrowing by the City and overlapping jurisdictions, and continued
resource base expansion.
For Downgrade
- Use of Chicago Skyway and parking meter asset and concession
lease reserves to offset future budgetary gaps.
- Failure to adhere to established financial and debt
policies.
- Inability to effectively accommodate actuarial pension funding
requirements.
To access rating and relevant documents, click here.
Methodologies
- Public Finance: U.S. Local Government General Obligation Rating
Methodology
- ESG Global Rating Methodology
Disclosures
A description of all substantially material sources that were
used to prepare the credit rating and information on the
methodology(ies) (inclusive of any material models and sensitivity
analyses of the relevant key rating assumptions, as applicable)
used in determining the credit rating is available in the
Information Disclosure Form(s) located here.
Information on the meaning of each rating category can be
located here.
Only those ratings on securities issued by this Issuer that also
are denoted on the Security Ratings tab for this Issuer on KBRA.com
as “endorsed” by Kroll Bond Rating Agency Europe Limited into the
European Union and/or by Kroll Bond Rating Agency UK Limited into
the UK are covered by the disclosures set forth in this press
release and the corresponding Information Disclosure Form. No other
ratings on issuances by this Issuer have been endorsed into the
European Union or the UK, and the disclosures set forth herein and
in the corresponding Information Disclosure Form are inapplicable
to those ratings and may not be used for regulatory purposes by
European Union or UK investors in these securities.
Further disclosures relating to this rating action are available
in the Information Disclosure Form(s) referenced above. Additional
information regarding KBRA policies, methodologies, rating scales
and disclosures are available at www.kbra.com.
About KBRA
Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit
rating agency registered with the U.S. Securities and Exchange
Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is
registered as a CRA with the European Securities and Markets
Authority. Kroll Bond Rating Agency UK Limited is registered as a
CRA with the UK Financial Conduct Authority. In addition, KBRA is
designated as a designated rating organization by the Ontario
Securities Commission for issuers of asset-backed securities to
file a short form prospectus or shelf prospectus. KBRA is also
recognized by the National Association of Insurance Commissioners
as a Credit Rating Provider.
Doc ID: 1005260
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Analytical Contacts
Linda Vanderperre, Senior Director (Lead Analyst) +1
646-731-2482 linda.vanderperre@kbra.com
Michael Taylor, Senior Director +1 646-731-3357
michael.taylor@kbra.com
Karen Daly, Senior Managing Director (Rating Committee Chair) +1
646-731-2347 karen.daly@kbra.com
Business Development Contacts
William Baneky, Managing Director +1 646-731-2409
william.baneky@kbra.com
James Kissane, Senior Director +1 646-731-2380
james.kissane@kbra.com