Moody's downgrades Chicago to junk rating

Moody's Investors Service announced on Tuesday it has lowered Chicago credit rating to junk bond status, citing unfunded pension obligations and lagging tax revenue, in a move Mayor Rahm Emanuel called irresponsible.

Moody's downgraded the city's debt rating on bond issues backed by property, sales and fuel tax revenue to Ba1, one notch below investment grade, from Baa2. As a result, the city's borrowing costs will increase as it pays more interest to make its bonds attractive to buyers.

In making the announcement, Moody's noted the city's options for curbing growth in its unfunded pension liabilities were hurt by an Illinois Supreme Court decision. The court ruled on Friday that the legislature's restructuring of Illinois' pension obligations violated a section of the state constitution.