Fitch Ratings lifted Chicago’s credit outlook to stable from negative Tuesday due to the city’s efforts to stabilize its pension funds.
“The Outlook revision to Stable from Negative reflects the recently enacted material increase in funding to the city’s pensions,” reads a statement from Fitch. “The chronic underfunding of pensions over many years has resulted in a high and growing long-term liability burden and constrained expenditure cutting flexibility.”
The move by Fitch comes as aldermen consider the mayor’s proposed water and sewer tax to shore up the city’s underfunded municipal pension fund. The water and sewer tax, which could go up for a City Council vote in September, would be phased in over four years and generate $239 million annually for the city’s pension fund.
Aldermen are being asked to consider the new tax after having already approved various tax hikes, including a record property tax increase last year, to address the unfunded liabilities in the city’s police, firefighters and laborers pension funds.
“Fitch’s action today is proof positive that Chicago’s finances are moving in the right direction,” Chicago Mayor Rahm Emanuel said in a statement. “We inherited decades of legacy liabilities and the financial challenges they brought, and we are continuing a deliberate strategy of reforms to put Chicago on a path to long-term financial stability, so we can continue to invest in our future. We are not going to solve the pension funding challenges overnight, but we have made substantial progress to finally put all four pension plans on a path to solvency, and we are seeing favorable responses from ratings agencies.”