Moody's Investors Service said it has downgraded to Baa1 from A3 the rating on the city of Chicago's motor fuel tax debt.
The outlook remains negative.
The Baa1 rating and negative outlook applies to $271.2 million of motor fuel tax revenue debt, including two series of debt that have not yet been issued: the motor fuel tax revenue TIFIA bond (Wacker Drive Reconstruction Project - including the Chicago Riverwalk expansion: TIFIA 2013-1004A) and the motor fuel tax revenue refunding bonds, Series 2013.
The downgrade of Chicago's motor fuel tax rating to Baa1 from A3 reflects the recent downgrade of the state of Illinois's general obligation rating to A3 from A2.
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.
Reflecting this risk, Chicago's motor fuel tax rating is capped at a rating level below the state's general obligation rating.