CHICAGO (CBS) -- A top budget analyst on Wednesday said Chicago taxpayers likely will be squeezed for more revenue, after the city's bond rating was downgraded to junk status.
In the wake of an Illinois Supreme Court ruling that overturned the state's landmark 2013 pension overhaul as unconstitutional, Moody's Investors Service expressed concerns about the city's ability to meet its own pension obligations in the future, and downgraded the city's bond rating two notches to Ba1, which is just a few levels above bonds that are in default.
The lower bond ratings mean the city must pay more to borrow money.
Ralph Martire, director of the Center for Tax and Budget Accountability, said the latest downgrade to junk bond status will cost the city an additional $200 million to $300 million, on top of its existing budget deficit and employee pension fund shortfalls.
"It's already looking at a deficit north of $250 to $300 million. Now pile on another couple hundred million – let's be conservative – from the impact of the downgrade of the bond status. Now pile on the $550 million increase in pension funding that's due this year, and you're talking about a problem that's collectively in excess of $1 billion, or a third of their budget for current services," he said.
According to Martire, the city will need more revenue to make ends meet, most likely from a property tax hike. Another possibility is the state expanding the sales tax to cover currently untaxed services like barber shop visits, daycare, or landscaping.
Mayor Rahm Emanuel has criticized Moody's decision to downgrade the city's credit rating, calling it irresponsible, and noting Moody's did not also downgrade the state's bond rating.
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