CHICAGO — After downgrading Chicago and its school system over mounting pension woes, Moody's Investors Service took aim at the Chicago Park District, which shares the same tax base.

The rating agency lowered the district's rating two levels to A1 from Aa2 and assigned a negative outlook. Wednesday's action impacts $428 million of general obligation limited tax debt and $448 million of GO unlimited tax debt.

The rating "reflects the large overall debt and pension burden on the district's tax base, which reflects significant debt and pension obligations of the city of Chicago, the tax base of which is coterminous with that of the park district," Moody's wrote.

The downgrade also incorporates the district's growing pension obligations. Positive features of the credit include the district's healthy financial reserves, modest direct debt burden, and substantial and diverse tax base.

Moody's made clear the district's relationship to the city in its rating assessment. In addition to sharing the same tax base, Chicago Mayor Rahm Emanuel holds sway over the district through his appointment power for its governing board. It's a "structure which we believe closely aligns the district's governance with that of the city's," Moody's wrote.

Moody's attributed the negative outlook to "the likelihood of continued growth in the district's unfunded pension liabilities, as well as those of overlapping governmental entities, particularly the city of Chicago.

"We believe these obligations will place increasing pressure on the district's tax base and could place pressure on the city's financial position," analysts wrote.

The park district had $355 million of unfunded liabilities in 2011 for a funded ratio of 58%.

Moody's downgraded $11.5 billion of city GO and revenue debt by two to three notches last week. The GO rating dropped to A3 from Aa3 and a negative outlook remains. The action followed a review prompted by a shift in how Moody's assesses state and local governments' pension obligations.

Moody's on Thursday then cut the Chicago Board of Education's rating by one level to A3 and assigned a negative outlook over its mounting pension woes that are straining its upcoming budget and the overall burden placed on the same tax district shared by the city and overlapping governments.

The park district could not immediately be reached for comment, but CPS and city officials have cited their downgrades as evidence that urgent state action is needed on pension reforms.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.