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June 7 (Reuters) - Moody's Investors Service on Friday downgraded the City of Chicago's (IL) motor fuel tax debt to Baa1 from A3. The outlook remains negative.
About $271 million of rated motor fuel tax debt is affected.
Moody's which on Thursday cut the rating on the State of Illinois to A3 said that the state's ongoing budget problems "enhance the risk that motor fuel tax revenues could be diverted for other state purposes."
"With legislative approval, the state has the authority to reduce pledged revenues by reducing motor fuel tax rates, increasing appropriations for various state purposes from gross motor fuel tax revenues, or reducing the allocation of remaining motor fuel tax revenues to municipalities," the agency said.
It also explained that the rating on Chicago's motor fuel tax "s capped at a rating level below the state's general obligation rating.