Piling it on: Fitch downgrades Cook County

Cook County residents got more bad news last week when Fitch Ratings, the global rating agency, downgraded Cook County’s debt to A+ from AA-. The rating agency cited skyrocketing pension costs as one of the key reasons for the credit downgrade. The most direct impact of the downgrade is higher borrowing costs for Cook County. Infrastructure and...

Cook County residents got more bad news last week when Fitch Ratings, the global rating agency, downgraded Cook County’s debt to A+ from AA-. The rating agency cited skyrocketing pension costs as one of the key reasons for the credit downgrade.

The most direct impact of the downgrade is higher borrowing costs for Cook County. Infrastructure and other long-term projects will cost more due to higher penalty interest rates. That means less county funds for health care, infrastructure and public safety.

But the real effects will be felt directly by Chicago and Cook County residents through worsening job prospects and higher unemployment. Companies, entrepreneurs and residents can sense what is to come if Chicago and Illinois politicians don’t implement real pension and spending reforms: higher property taxes and more fees on everything from phones to parking.  Higher costs and increased business uncertainty will send more companies packing and keep new ones from coming in.

Cook County, which Fitch calls the economic and cultural hub of the Midwest, is already in deep trouble. Chicago and its sister governments have already seen a slew of credit downgrades, and the city’s bonds are now just three notches away from becoming junk. Among the nation’s largest cities, only Detroit has a worse rating than Chicago.

Late last year Fitch Analyst Arlene Bohner said Chicago was approaching an “inflection point where inaction on pension reform will negatively impact the city’s finances and threaten to crowd out spending on city services.”

Without real pension reform, Chicago is on a path toward insolvency. Cook County’s downgrade will surely add to the pressure.