CHICAGO — Moody’s Investors Service put Chicago on notice that its unfunded pension obligations of nearly $15 billion threaten the stability of the city’s Aa3 general obligation rating.

Moody’s affirmed the rating but shifted the outlook to negative from stable, primarily attributing the action to “outsized pension pressures” and the lack of a plan to address them to date.

Mayor Rahm Emanuel responded Thursday by announcing that he was sending a letter to leaders of the Illinois General Assembly outlining his support for four central reforms he wants in state legislation aimed at fixing the problem.

In his letter, Emanuel cited the rating agency concerns. “The cost of continued inaction is severely high and will lead to further burden on taxpayers who have been asked to sacrifice so much already and employees who have done nothing wrong,” he said. The mayor added that it could cost the city an additional $1.4 billion in taxes annually to solve the pension funding crisis without reforms.

Emanuel wants the city included in legislation that would raise the retirement age, suspend automatic cost-of-living increases, expand retirement plan choices for new employees, and increase contributions level. However, no specific plan with specific savings levels was released.

Fitch Ratings affirmed Chicago’s AA-minus and stable outlook and Standard & Poor’s affirmed its A-plus and stable outlook on $7.8 billion of GO debt.

The reviews come ahead of a city GO issue for about $540 million slated for mid-May. It includes about $270 million of tax-exempt and taxable new-money and another $270 million of tax-exempt and taxable refunding bonds for both present-value savings and restructuring purposes.

Mesirow Financial Inc. is the senior manager, AC Advisory and Public Finance Associates are advisors. Chapman and Cutler LLP is bond counsel.

The Moody’s report praised progress made by Emanuel — who is nearing his first anniversary as mayor — in reining in Chicago’s structural budget woes and efforts to offset its high debt burden by luring private investment to supplement infrastructure spending.

Since taking office, Emanuel and his chief financial officer, Lois Scott, have acknowledged the need to address Chicago’s unfunded pension woes, though the city’s $6.3 billion 2012 budget left any solutions for another day, prompting Moody’s warning that a reckoning is at hand.

“Chicago’s administration has yet to unveil a detailed strategy for improving pension funding levels and is not currently contributing the full annual required contributions,” Moody’s lead Chicago analyst Rachel Cortez wrote. “Should pension pressures continue to escalate absent a specific plan of reform, the city’s credit quality will likely weaken.”

Scott acknowledged in a statement that action on the issue is growing more urgent after years of studies, but she shifted some of the burden onto state lawmakers.

“We couldn’t agree more with the agencies’ concerns over the pension crisis,” she said. “The cost of continued inaction will lead to further burden on taxpayers who have done nothing wrong and have been asked to sacrifice so much already. Leaders in Springfield must work together and fix this funding problem, and they must do it now.”

The Moody’s report was released late Wednesday, on the eve of a city-sponsored investors’ conference aimed at improving investor relations by sharing updates on the financial positions of the city and its sister agencies.

Chicago’s current pension payment — $476 million in 2012 — to its four pension funds is based on a formula set by state statute and falls short of the annual required contribution determined by actuaries to fully fund the system. Though set by statute, the city is not precluded from contributing more. A payment of $1.1 billion this year would be needed to meet the ARC.

Both the Chicago police and firemen’s funds were affected by state reforms adopted in 2010 that require escalating city payments totaling more than $700 million beginning in 2015 to reach funded status by 2041, and 2040, respectively. Rating agencies have raised concerns over the impact of meeting the added funding burden.

The Chicago laborers’ fund is headed toward insolvency in 2035 and the Chicago municipal employees’ fund will reach its tipping point in 2030. The firemen’s fund closed out 2010 with $2.5 billion of unfunded liabilities for a funded ratio of just 32%.

Chicago’s police fund closed out the year with $5.7 billion in unfunded obligations for a funded ratio of just 40%. The Chicago laborers’ fund had $542 million of unfunded liabilities for a funded ratio of 74% and the municipal employees fund had unfunded liabilities of $6 billion for a funded ratio of just 50%.

The other rating agencies also raised concerns. “In our view, the city’s lack of progress in making structural changes in pension funding is a negative credit factor,” Standard & Poor’s wrote.

Fitch Ratings said it is “concerned about the current magnitude of the unfunded liability, the large impending annual pension contribution increases, and the potential legal and policy hurdles to achieving meaningful pension reform.”

Moody’s said the city’s rating is supported by its position as an economic hub, its sizeable tax base, significant revenue-raising flexibility as a home-rule community, and its closely managed use of floating-rate debt and interest-rate swaps with diverse credit support.

Moody’s also praised the new administration’s accomplishments.

“New governance and a revitalized management team has reduced staff and implemented operational efficiencies to position the city to eventually eliminate its reliance on non-recurring revenues to fund ongoing operations,” Cortez wrote.

In addition to pensions, the city’s challenges remain elevated unemployment levels, a large inventory of homes in foreclosure, improving but still narrow general fund reserves, and above-average levels of slowly amortizing debt relative to valuation and per-capita basis.

Illinois pension reform is currently on lawmakers’ agendas before wrapping up their session by the end of May.

Gov. Pat Quinn has proposed moving employees into a new plan that raises the retirement age and cuts some benefits in exchange for preserving their health care benefits in retirement.

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