Political in-fighting between Chicago Mayor Brandon Johnson and Chicago City Council has contributed to a credit downgrade for the city.
Fitch and Kroll both downgraded Chicago’s credit one notch due to both the city’s financial challenges and the contention that played out in the City Council at the end of last year during budget negotiations.
“The City remains investment grade with all four major credit rating agencies. Despite today’s actions, the City of Chicago has continued to achieve strong investor participation in its bond financings. The City’s financial leadership remains committed to maintaining disciplined fiscal oversight and ensuring sustained investor engagement moving forward,” Johnson’s administration said in a statement.
Joe Ferguson, president of the Civic Federation, said it will lead to higher borrowing costs.
“We’re borrowing money to pay for the firefighter back-pay under the new collective bargaining agreement. We’re borrowing money to pay for judgments and settlements that were already in the pipeline. And so they’ll be just a little bit more costly,” Ferguson said.
Ferguson isn’t sugarcoating the the financial consequences, saying it will be even more costly to taxpayers longterm.
“Hundreds of millions of dollars is what we’re talking about,” Ferguson said.
The agencies had been signaling a downgrade was possible, so it wasn’t a surprise to Justin Marlowe, the director of the Center for Municipal Finance at the University of Chicago.
“Broadly speaking, you can put this downgrade in the ballpark of somewhere around say $3 to $5 million each year in additional borrowing costs going forward. And to put that in context, that’d be roughly the equivalent of, say, a neighborhood fire crew or a neighborhood EMS crew,” Marlowe said.
Last year, after council members and Johnson sparred for months over the 2026 budget, a coalition of alders banded together to craft its own plan by taking out the mayor’s controversial head tax on large companies. Marlowe says the rating agencies were watching that contention, plus growing pension obligations and revenues not in line with spending.
“Fundamentally, what it means for the city is that we have leadership that’s sort of two ships passing in the night. And again, the ratings agency’s job is to call balls and strikes, and that’s essentially what they’ve done with these recent downgrades,” Marlowe said.
Johnson’s administration said Thursday like the rating agencies, it also had concerns about the final budget and the lack of structural revenue sources. But it was quick to reassure people.
“Importantly, these rating actions do not change the City’s day-to-day operations, service delivery, or commitment to fiscal responsibility,” a spokesperson said.
Calling themselves the “Budget Accountability Coalition,” the alders who crafted the budget clapped back, saying, “Chicago’s credit challenges are the result of ongoing budget mismanagement, not the City Council’s amendment to 1.6% of the Mayor’s proposed FY26 budget that ultimately made it more financially responsible. Council continues to be collaborative; however, we must also maintain our independence.”
