KBRA Affirms AA- Rating for City of Chicago, IL Second Lien Wastewater Transmission Revenue Bonds
30 Oct 2025 | New York
KBRA affirms the AA- long-term rating with a Stable Outlook for the City of Chicago, Illinois Second Lien Wastewater Transmission Revenue Bonds. The rating continues to reflect the Wastewater System’s strong financial flexibility, historically stable operating performance, modest scope of operations, and the favorable demographic characteristics of the large and diverse service area.
The Second Lien Wastewater Transmission Revenue Bonds are limited obligations of the City, payable solely from a second lien on net revenues of the Sewer Revenue Fund. The City had $1.52 billion Second Lien Wastewater Transmission Revenue Bonds outstanding as of December 31, 2024.
Key Credit Considerations
The rating affirmation reflects the following key credit considerations:
Credit Positives
- Large, diverse, and stable City of Chicago customer base provides ample resources to fund the operations of the System which are limited to the collection and conveyance of sanitary and storm sewage.
- Sound debt service coverage levels generated by consistent rate increases and the effectuation of operational efficiencies.
- Healthy liquidity in each of the last six years.
Credit Challenges
- Lack of a debt service reserve fund (DSRF), and a relatively weak (1.1x) rate covenant.
- High leverage, evidenced by a debt-to-plant ratio of 67% at FYE 2024, coupled with a robust $1.9 billion multi-year CIP expected to require the issuance of significant new-money parity debt through 2029.
Rating Sensitivities
For Upgrade
- Material, sustained reduction in leverage.
For Downgrade
- Failure to implement timely rate increases leading to declines in debt service coverage and/or constrained levels of unrestricted liquidity.
- Unfavorable service area demographic trends leading to reduced rate-setting flexibility and affordability.
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