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Moody’s Investors Service has downgraded Chicago’s debt rating, citing its overwhelming pension burden. Moody’s dropped the city’s rating to Baa2.
A rating of Baa2 is eight notches below the highest debt rating of Aaa.
Moody’s said in its statement its outlook for the city remains negative. A drop of two more notches would make mean the city’s bonds would become“junk” bonds.
“We strongly disagree with Moody’s decision to reduce the city’s credit rating and would note that Moody’s has been consistently and substantially out of step with the other rating agencies, ignoring the progress that has been achieved,” a spokeswoman for Mayor Rahm Emanuel, Kelley Quinn, said in a statement.
Chicago has more than $8 billion in taxpayer-backed general obligation debt, as well as roughly $800 million in additional bonds backed by sales tax and motor fuel tax revenues.
Economist Mark J. Perry frequently gives updates on U-Haul “One Way” truck rental prices as a form of an economic indicator of where people are moving too. U-Haul truck rental prices show how prices are affected by demand. Here is an example that he posted in May of this year:
Check out the Amazing Price Differentials for One-Way U-Haul 26-Foot Truck Rentals:
Chicago to Houston: $2,588
Houston to Chicago: $473
Ratio: 5.5 to 1
Chicago to Dallas: $2,460
Dallas to Chicago: $636
Ratio: 3.9 to 1
Obvisously there is greater demand in people wanting to move out of Chicago then moving to it along with the fact that trucks leaving Chicago is massive. He also addresses “perfect price parity” for doubters of this economic data.
Here’s an example of almost perfect price parity, suggesting almost a perfect balance in one-way U-Haul 26-foot truck rentals in each direction.
Los Angeles to Chicago: $3,878
Chicago to Los Angeles: $3,869