First Moody’s Investors Service served Chicago with a triple-notch credit rating downgrade, and now Fitch Ratings Inc. has done the same.
Fitch made the announcement in November and added its rating outlook on the city’s debt is “negative.”
“The rating firms are finally highlighting risks arising from significant costs and liabilities of government that have been hidden for years with dishonest accounting,” said Sheila Weinberg, CEO and founder of the Illinois-based Institute for Truth in Accounting.
In June 2013, The Heartland Institute and Truth in Accounting published a report on local government debt in Cook County, Illinois – which includes Chicago – titled “The Municipal Government Debt Crisis.” The study indicated 13 taxing jurisdictions (including Chicago) were in worse shape than Stockton, California – a city that has already entered municipal bankruptcy proceedings.
A month after this study appeared, Moody’s announced its downgrade of Chicago debt. Now Fitch has followed suit. Meanwhile, the Chicago Tribune has been publishing “Broken Bonds,” a series of reports detailing billions of dollars of borrowing that has been structured to push most repayments far into the future, enabling past and current Chicago officials to avoid most of the consequences of the debt. Most of the borrowing occurred during the tenure of former Mayor Richard M. Daley.
Chicago’s general obligation debt has quadrupled in 18 years, topping $8 billion.