Moody's Investors Service said it has downgraded to A3 from Aa3 the rating on the Chicago's $181 million of outstanding rated motor fuel tax debt.
The outlook has been revised to negative.
The downgrade of the rating to A3 and the revision of the outlook to negative is based on the credit quality of the state of Illinois (general obligation rated A2/negative outlook) and the state's ability to reappropriate or otherwise limit pledged revenues.
Debt service on the motor fuel tax bonds of Chicago (general obligation rated Aa3/negative outlook) is secured by a senior lien pledge of a portion of the city's allocation of state motor fuel tax revenues. With legislative approval, the state has the authority to reduce pledged revenues by reducing motor fuel tax rates, increasing appropriations for various state purposes from gross motor fuel tax revenues, or reducing the allocation of remaining motor fuel tax revenues to municipalities.
The state's ability to alter pledged revenues presents the risk of non-appropriation, and the rating is therefore notched from the state's general obligation rating.
