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Fiscal Disaster: A major credit rating agency has just given Chicago, with more general obligation debt per capita than Detroit, its second triple-notch downgrade in six months. Its bonds are perilously close to junk status.
Citing skyrocketing pension costs and a lack of meaningful solutions, Fitch Ratings lowered Chicago's debt to A- from AA- last week, making it the second serious downgrade since July.
The move by Fitch follows a triple downgrade of Chicago's bond rating by Moody's Investors in mid-July.
But Illinois law allows Chicago to borrow billions without asking residents’ permission or providing much information about how the money is spent. There is no limit on the city’s general obligation debt, and the sole check and balance is the City Council, a body that rarely pushes back on major mayoral decisions.
Since 2007, aldermen have authorized $7.6 billion in general obligation bond issuances without a single dissenting vote. And each year they get millions in bond proceeds to dole out for projects in their wards.