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Calling the plan
"a positive step," S&P kept Chicago's general obligation rating
at BBB-plus with a negative outlook, noting it could be revised
to stable once the tax portion of the plan is formalized.
S&P warned in June that the nation's third largest city could be
subjected to rating downgrades in the absence of a "solid
funding mechanism" for its municipal and laborers' retirement
systems.
Last week, Emanuel unveiled a plan to pour more money into the
municipal fund, which covers about 71,000 current and former
city workers, through a new water and sewer tax that will be up
for a city council vote next month.
The rescue plan for the municipal system followed previous
action by the city to boost funding for police and fire pensions
through a phased-in $543 million property tax increase, and its
laborers' system through a hike in a telephone surcharge.
The municipal fund, the city's largest, and the laborers' fund,
the smallest, are projected to run out of money within 10 years.
Emanuel must seek approval from the Illinois Legislature later
this year for new funding schedules for those two pension
systems.
The mayor's pension fix was also cheered by the U.S. municipal
bond market, where the city's bonds late last week were trading
at higher prices albeit with still wide so-called credit spreads
over the market's benchmark yield scale.
The task of fixing the city's pensions became harder after the
Illinois Supreme Court in March threw out a 2014 state law that
reduced benefits and increased city and worker contributions to
the municipal and laborers' funds.
Chicago's $33.8 billion unfunded pension liability has weighed
on the city's credit ratings, which span from low investment
grade to "junk."
(Reporting By Karen Pierog; Editing by Bernard Orr)
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