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S&P lowers Chicago's credit rating

Mayor Rahm Emanuel speaks at the opening of the Digital Manufacturing and Design Innovation Institute on May 10. | Christian K. Lee/For Sun-Times Media

A major credit-rating agency lowered the city’s credit rating Thursday to three notches above junk status.

Standard & Poor’s announcement Thursday that it was dropping the rating on Chicago’s general-obligation bonds to A- from A+ — still investment grade — came days after Moody’s Investors Service dropped Chicago’s bond rating to junk status.

The S&P reacted to what Moody’s did, which Mayor Rahm Emanuel has called “irresponsible.”

“The rating action reflects our view that city’s efforts are challenged by short-term interference that prevents a solid and credible approach at this time,” S&P credit analyst Helen Samuelson said in a press release. “That said, we recognize that the city has a diverse tax base and a management team that has good policies in place.”

In a statement, Chicago’s Chief Financial Officer Lois Scott said, “The City of Chicago’s financial crisis is real, urgent, and has been decades in the making. The downgrade by Moody’s of the city’s credit — a decision they say was driven by the Illinois Supreme Court’s reversal of the state pension reform bill — has substantially magnified the city’s challenges and will add real costs to Chicago’s taxpayers. In fact, S&P noted today that their own downgrade is driven by the short-term pressures on the city’s fiscal position that were created by Moody’s actions earlier this week. However, unlike Moody’s, S&P recognizes the city’s efforts to not only address its legacy liabilities, but that it has the right tools in place to address the challenges it faces.”

Like Moody’s, S&P referred to last week’s Illinois Supreme Court decision overturning state pension reform.

The lower credit ratings increase the cost of the city’s borrowing.

Contributing: Associated Press