Standard & Poor’s on Friday affirmed Chicago’s bond rating at three levels above “junk” status, but changed the city’s financial outlook from “negative” to “stable,” thanks to Mayor Rahm Emanuel’s plan to slap a 29.5 percent tax on water and sewer bills to save the largest of four city employee pension funds.
“The city is gradually moving in the right direction toward stabilizing its budget and its pension plan contributions,” the S&P report states. “We believe the City Council’s approval of the new tax, coupled with adjustments to benefits offered to new hires, are tangible steps that forestall credit deterioration in the near term.
“However, in order to ensure the long-term sustainability of its pension contributions and continued credit stability, we believe that the city will need to identify additional measures to address its mounting pension contributions within the next two years.”
Mayor Rahm Emanuel called the outlook upgrade a well-earned recognition of the work that he and the City Council have done to reduce the city’s structural deficit by “more than $600 million” while identifying permanent funding sources for all four city employee pension funds.
“Our hard work is now paying off. . . . It has stabilized the city’s finances,” he told the Chicago Sun-Times.
But, the mayor agreed with S&P that the job is not done.
He has openly acknowledged that the city’s largest pension fund would still be left with a gaping hole in 2023 — even after the utility tax is fully phased in. That hole will require “more revenue” to honor the city’s ironclad commitment to reach 90 percent funding over a 40-year period.
“What we haven’t gotten out of the budget is our bad politics. . . . This an admonition to me. This is an admonition to my administration. And it’s an admonition to the City Council. Because the crisis has been abated and we have stabilized, we can’t go back to our bad habits,” Emanuel said.
Chicago taxpayers have paid a heavy price for easing the city’s $30 billion pension crisis.
They’ve been hit with $838 million in property tax increases for police, fire and teacher pensions; a 29.5 percent tax on water and sewer bills to save the Municipal Employees pension fund and a 56 percent increase in the monthly tax tacked on to telephone bills — on cell phones and land lines — for the Laborers Pension fund.
“I did it. I wasn’t gleeful about it. But, I am pleased collectively for us that two [credit] rating agencies have recognized the work that’s happened,” Emanuel said.
Besides S&P’s action Friday, the Fitch ratings agency shifted Chicago’s financial outlook from negative to stable earlier this year.