Fitch Ratings reduced its rating on city bonds Thursday, citing Chicago’s rapid use of one-time reserves to balance past operating budgets, its underfunding of pension obligations and its steep declines in tax revenue.

Fitch cut its rating on $6.8 billion in outstanding general obligation bonds by one notch, from AA+ to AA, which is the third rung from the top (and still considered high quality.) But the agency also issued a negative outlook, and warned that further downgrades were possible if the city doesn’t balance its operating budget and address its retiree benefit costs — or if the local economy gets worse. Get the full story »