Chicago credit rating downgraded over operating deficits

Chicago's credit rating is being downgraded in the wake of last year's budget battle between Mayor Brandon Johnson and the City Council.

Fitch Ratings has given Chicago a BBB+ overall, while downgrading sales tax securitization from AAA to AA+.

Fitch said the rating cut reflects the city's operating deficits since 2023.

In a statement, Fitch said the downgrade is due to disagreements between the Johnson administration and the City Council, adding that the disagreements have "impeded decision timeliness and the development of a credible and comprehensive plan to restore structural balance."

In response to the city's credit rating downgrade, Civic Federation President Joe Ferguson released the following statement: "The Civic Federation takes no pleasure in yesterday's news that two rating agencies have downgraded the City's credit rating. A credit downgrade is not just symbolic; it indicates real financial consequences and long-term ramifications for not just the City but its residents."

Late last year, the mayor and his City Council rivals locked horns for months over the city budget, to the point where a government shutdown at the end of last year was feared.

The City Council approved a $16.6 billion spending plan opposed by the mayor in December. Which Mayor Johnson had backed a corporate head tax, his opponents' budget relied on an increase in the city's plastic bag tax, overhauling the tax on off-premise liquor sales; legalizing video gambling terminals in Chicago, and opening up new advertising opportunities.

Mayor Johnson declined to veto the budget that was approved.

In a statement, the Johnson administration said despite the cut in the credit rating, the city has continued to achieve strong investment participation in its bonds, and remains investment grade with all four major credit rating agencies.

In addressing concerns about the 2026 budget as part of the reason behind the credit rating cut, the Johnson administration reiterated its concerns with the budget that passed without the mayor's support.

"The Johnson Administration agrees with several concerns raised by the rating agencies and those concerns were expressed by the Mayor and his financial leadership team throughout the 2026 Budget process," the Johnson administration said. "In particular, the rating agency opinions discuss the continued lack of structural revenue sources as well as risks related to certain revenue streams included in the Fiscal Year 2026 Budget, including the untested and non-recurring sale of uncollected receivables."

The Johnson administration also emphasized that the credit rating cut does not mean anything when it comes to the city's "day-to-day operations, service delivery, or commitment to fiscal responsibility." The administration further noted that the rating agencies also identified Chicago's "economic significance to the Midwest, growing tax base, and diversity of industry as positive."

Among the specific projects the Johnson administration cited as showing evidence of Chicago' vitality were the new Chicago Fire FC stadium being built on The 78 megadevelopment in the South Loop, the Chicago Transit Authority's Red Line extension south to 130th Street, Google gut-renovating the Thompson Center, and the transformation of the city's financial district with the LaSalle Street Reimagined projects.

"The Johnson Administration will continue to lead, just as it has on the projects noted above, and work collaboratively with City Council to advance transparency, collaboration, and solutions to solidify the City's financial foundation and the 2026 Budget," the administration said. "We will continue engaging constructively with rating agencies and investors while prioritizing the fiscal stability of the City and the residents we serve."