CHICAGO – Standard & Poor's is warning Chicago that analysts are watching to see how the city copes with a potentially bigger pension payment should its push for state relief falter.

Chicago Mayor Rahm Emanuel pushed a property tax through this fall to deal with skyrocketing police and firefighter pension contributions under a 2010 state mandate. The increase slated for 2016, however, anticipates that a proposed re-amortization of the payment schedule is enacted by the state. If not, the city must come up with another $220 million next year.

The legislation has passed but it's not yet been sent to Gov. Bruce Rauner as state leaders remain locked in a budget battle.

"Our future view of the city's ability to meet its obligations will depend on how the city addresses its continued budget gap" if the new schedule is not adopted, Standard & Poor's said.

"Should the governor not approve SB 777, Chicago's failure to successfully implement contingency plans in a timely manner to fully meet its pension obligations with an identifiable and reliable revenue source would likely strain the rating on the city, potentially by multiple notches," analysts wrote in a Dec. 29 report.

The city's GO ratings range from a speculative-grade Ba1 from Moody's Investors Service to A-minus from Kroll Bond Rating Agency. Fitch Ratings and Standard & Poor's assign BBB-plus ratings and all but Kroll take a negative view on the credit. Kroll has a stable outlook.

Standard & Poor's analysts said no rating actions are currently warranted at this time. The report came in tandem with the deadline for the city to submit its final property tax levy, which means more revenue from that source is off the table should the legislation fall through.

"Officials indicate the city has contingency plans to fully accommodate the larger pension contribution amount, if needed, in the form of various revenue sources it can implement during 2016, and it has short-term financing in place that it can use until those revenues become available," Standard & Poor's said.

The city's general obligation ratings have plummeted over its massive $20 billion tab of unfunded liabilities and the pressures posed by rising costs. Chicago faces other pension challenges.

On the legal front, Chicago is awaiting an Illinois Supreme Court ruling on the constitutionality of its 2014 reform package overhauling its other two funds that cover laborers and general municipal employees. A lower court judge in July voided the reforms, finding benefit cuts violated the state constitution. If the reforms are voided, the city actually would face a lower payment in 2016 but the funds would return to a path headed toward insolvency in the next decade.

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