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Chicago Public Schools' latest bond issue got a green light from one of Wall Street's rating agencies today, but with an asterisk the size of Mt. Rushmore, according to a Crain’s Chicago Business commentary today. Fitch Ratings said that it gave an “A” rating to a $500 million CPS offering because the issue has a dedicated revenue source — a $45 million property tax hike recently approved by the City Council — that's legally "insulated" from a possible CPS "bankruptcy.” The agency used the word bankruptcy in its statement, something CPS chief Forrest Claypool has sworn is not coming but that the district alluded to itself in bond documents earlier this week as a "hypothetical" possibility. Despite denials from Claypool and Mayor Rahm Emanuel that bankruptcy is on the way, even a passing reference ought to raise some eyebrows, according to the commentary. Illinois Gov. Bruce Rauner (R) has from time to time urged bankruptcy as a solution to CPS' woes, suggesting that such a step would allow the district to restructure its contract with the Chicago Teachers Union.

The judge overseeing San Bernardino, Calif.’s municipal bankruptcy said yesterday that she would approve the city's plan to restructure its finances, a spokeswoman for the city told Reuters. An official confirmation order is expected by late January, spokeswoman Monica Lagos added. Bankruptcy Judge Meredith Jury in recent months has been signaling support for the Southern California city's plan to emerge from Chapter 9 bankruptcy after four years. The plan involves slashing bondholder debt and retiree healthcare costs while protecting pensions. San Bernardino's financial restructuring also includes folding its fire department into San Bernardino County's fire services district as a cost-cutting measure.

By the end of today, Atlantic City will use $2.3 million to cover payments due on its bonds, saving investors from the toll of the seaside casino town’s financial collapse, Bloomberg News reported yesterday. With New Jersey seizing control of the city’s finances to avoid a default, the burden is poised to fall instead on residents, municipal employees and businessmen. Atlantic City is the latest test for New Jersey, which hasn’t allowed a local government to default or go bankrupt since the Great Depression -- a commitment that’s left even its distressed municipalities able to raise money for schools, roads and other public works in the bond market. This stands in contrast to what has been seen in California, Alabama and Michigan, where municipalities resorted to bankruptcy after the most recent recession to escape from debts they could no longer afford. The city of 39,000 residents has been veering toward insolvency since a third of its casinos shut down in 2014 due to the proliferation of legalized gambling on the East Coast, which undercut the city’s gambling monopoly. That dealt a blow to its finances, leaving an ongoing budget shortfall of about $100 million, as revenue disappeared and casinos still opened successfully challenged their annual property-tax bills.

Dallas’s mayor, Michael S. Rawlings, testified earlier this month to a state oversight board that his city appeared to be “walking into the fan blades” of municipal bankruptcy, the New York Times reported today. Though Dallas has the fastest economic growth of the nation’s 13 largest cities, its pension fund for its police officers and firefighters is near collapse and seeking an immense bailout. Over six recent weeks, panicked Dallas retirees have pulled $220 million out of the fund. What set off the run was a recommendation in July that the retirees no longer be allowed to take out big blocks of money. Even before that, though, there were reports that the fund’s investments — some placed in highly risky and speculative ventures — were worth less than previously stated. Now, the Dallas Police and Fire Pension System has asked the city for a one-time infusion of $1.1 billion, an amount roughly equal to Dallas's entire general fund budget but not even close to what the pension fund needs to be fully funded. Nothing would be left for fighting endemic poverty south of the Trinity River, for public libraries, or for giving current police officers and firefighters a raise.

The 11th Circuit Court of Appeals scheduled oral arguments for Dec. 16 in Atlanta in the appeal of Jefferson County, Ala.'s bankruptcy plan, the Bond Buyer reported yesterday. "I am delighted that our case is now set and that we will have our day in court," said Jefferson County Commission President Jimmie Stephens, adding that he anticipates the date will remain firm. Arguments in the county's case have been tentatively set seven times in the past year only to be removed from the calendar, county attorney Kenneth Klee with Klee, Tuchin, Bogdanoff & Stern LLP, said in a Nov. 4 letter requesting that the court a set a firm date for the appeal. There is no set schedule after that for the judicial panel to issue a ruling. Jefferson County has now been in appeal mode nearly three years defending its bankruptcy plan, a year longer than it took to go through the chapter 9 process. In December 2013, two years after filing to adjust debt primarily related to sewer system obligations, Jefferson County exited bankruptcy after selling $1.8 billion in sewer refunding warrants to write down $1.4 billion of the sewer system's debt. A bondholder security provision in the county's plan allows investors to go back to the bankruptcy court should county commissioners fail to comply with their promise to enact sewer system rates that will support the 40-year warrants.

A federal judge told San Bernardino, Calif., officials to negotiate with an insurer to gain access to money that would have gone to families who have filed lawsuits claiming police brutality, an issue that’s again delayed the exit of the city of 200,000 from bankruptcy, the Wall Street Journal reported today. Bankruptcy Judge Meredith Jury said yesterday that another bankruptcy judge will mediate a dispute between city leaders and insurance administrators over coverage for major lawsuits, including the police litigation. She set a Dec. 6 hearing to determine whether the city can leave bankruptcy protection after more than four years. The city had filed for bankruptcy on Aug. 1, 2012, saying that it suffered from double-digit unemployment and lower tax revenue from fallen property values. City lawyers have proposed a 76-page plan that would pay 1 percent of $209.3 million owed to retirees, families who have won police brutality lawsuits and other unsecured debts. Under that plan, which Judge Jury must approve, a European bank owed $51 million in bond debt would be paid 40 percent of its claim over 30 years, according to documents filed in U.S. Bankruptcy Court in Riverside.

State and local government bonds dropped by the most in more than three years since the Nov. 8 election amid speculation that President-elect Donald Trump’s plan to slash taxes and unleash a new wave of spending will spur inflation and weaken demand for the tax-exempt securities, Bloomberg News reported yesterday. That’s coming just as municipalities are forecast to keep selling new debt at a swift pace after voters approved at least $55 billion of borrowing at the polls, threatening to put further pressure on prices. The election fallout is threatening to wipe out gains posted in the municipal market this year as the Federal Reserve held off on raising interest rates. Since last week’s election results, the securities have lost 2 percent, cutting this year’s return to 1.1 percent, according to Bloomberg Barclays municipal index. The yields on benchmark 10-year debt soared Monday by 0.2 percentage point to 2.13 percent, the highest since December, before steadying early Tuesday. It was the biggest one day jump since June 2013.

New Jersey had credit ratings on about $36 billion of bonds reduced by S&P Global Ratings on expectations of worsening budget pressure brought on primarily by underfunded pension obligations, Bloomberg News reported yesterday. The general-obligation rating was cut by one step yesterday from A to A-, the fourth-lowest investment grade. It’s the 10th downgrade from the three major rating companies under Governor Chris Christie, the most of any New Jersey governor. New Jersey had an AA rating, the third highest level, from S&P at the start of his tenure in 2010. New Jersey’s pension system had about $136 billion less than it needs to cover all the benefits due when workers retire, the result of the state’s more than decade-long failure to put enough money into the fund each year. Those annual payments are now soaring as the government is under pressure to pay down that debt, exerting a strain on New Jersey’s budget. Currently, New Jersey only has 37.5 cents available to pay each $1 of benefits, according to data compiled by Bloomberg. S&P has a negative outlook on the state, indicating it could be downgraded again.