Moody's Downgrades Chicago's Credit Rating, Lowest Of Any Major City Except Detroit

CHICAGO (CBS/AP) — Moody's Investors Service has downgraded Chicago's credit rating, citing the city's unfunded pension liabilities.

The agency announced Tuesday it's lowering the rating on $8.3 billion in debt from A3 to Baa1, putting it only three notches above junk-bond status.

Moody's gave Chicago a negative outlook indicating another downgrade could occur if there's no pension fix. Moody's says the rating "reflects the city's massive and growing unfunded pension liabilities."

Moody's says those liabilities "threaten the city's fiscal solvency" unless major revenue and other budgetary adjustments are adopted soon and are sustained for years to come.

The lower rating means the city will have to pay high interest rates.

Moody's says a commitment to increasing tax revenue is one thing that could raise the rating. Chicago now has the worst credit rating of any major city except Detroit.