Citing CPS’s finances, Moody’s to review city’s bond rating

The Chicago Public Schools’ financial troubles are threatening to pull down the city’s bond rating.

Moody’s Investors Service said Friday it has placed the city of Chicago’s general obligation bond rating under review.

The Wall Street credit-rating agency said it made the decision to review the city’s Ba1 bond rating based on “the continued uncertainty surrounding CPS’ fiscal situation.

“These actions reflect the close financial, political and governance relationship the city shares with the Chicago Board of Education.”

The review will apply to the city’s $7.3 billion in outstanding general obligation borrowing through the sale of municipal bonds.

Moody’s said decisions to review bond ratings are made “when a rating action may be warranted in the near term but when further information or analysis is needed to reach a decision.”

It said most reviews are completed within 30 to 90 days.

The private agency also cited Illinois’ two-year gap between budgets and the city’s commitment to CPS finances as reasons for the review.

“Continued uncertainty surrounding the school district’s financial situation in the wake of the state’s own budgetary pressures and an indicated commitment from the city’s administration to staving off further deterioration in the district’s finances suggest the possibility of more direct intervention by the city in the district’s fiscal affairs.”

The decision to review the city’s bond rating came a day after the Moody’s placed CPS’ general obligation bond rating, currently at B3, under review.

A spokeswoman for the city’s Office of Budget and Management declined to comment but cited a December 2016 letter that Mayor Rahm Emanuel sent to Moody’s, blasting its ratings criteria and requesting that it withdraw its ratings of Chicago debt.

Amid then-ongoing state budget negotiations, Moody’s had said Wednesday it also was placing the state’s Baa3 bond rating under review. Even with a new budget — approved Thursday, with the Illinois House voting to override Gov. Bruce Rauner’s veto — Moody’s said the state could still see its rating fall.

The decision to review the city’s bond rating came a day after the Moody’s placed CPS’ general obligation bond rating, currently at B3, under review.

Amid then-ongoing state budget negotiations, it said Wednesday it also was placing the state’s Baa3 bond rating under review. Even with a new budget — approved Thursday, with the Illinois House voting to override Gov. Bruce Rauner’s veto — Moody’s said the state could still see its rating fall.