Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Chicago mayor eyes big bond refunding to save $200 million for budget

Published 10/21/2019, 05:47 PM
Updated 10/21/2019, 05:51 PM
Chicago mayor eyes big bond refunding to save $200 million for budget

Chicago mayor eyes big bond refunding to save $200 million for budget

By Karen Pierog

CHICAGO (Reuters) - Chicago would refund $1.3 billion of outstanding debt to produce a one-time, $200 million savings to help plug a big hole in its upcoming budget, city officials said on Monday

The bond plan is the biggest piece of a budget-balancing puzzle that Mayor Lori Lightfoot has announced so far as she prepares to unveil a fiscal 2020 budget on Wednesday for the nation's third-largest city.

Just months after taking office, the mayor in late August warned of "hard choices" to deal with an $838 million deficit, the biggest since at least 2001 due to growing costs for personnel, pensions and debt.

A chronic budget deficit and big unfunded pension liability have weighed on the city's credit ratings, leading to high borrowing costs.

Jennie Huang Bennett, Chicago's chief financial officer, told reporters that about 40% of the mayor's budget fix will be one-time measures like the bond refunding savings, while the remaining 60% will be structural solutions.

"Given the magnitude of the budget, I don't think anyone really expected that we were going to address the entire gap with all 100% structural solutions," she said.

Lightfoot's bond plan, which is subject to city council approval, seeks to take advantage of current lower interest rates to decrease borrowing costs for existing, callable general obligation (GO) and motor fuel tax bonds without extending their maturities, Bennett said.

The plan would also involve new subordinate lien bonds under Chicago's Sales Tax Securitization Corporation, she added. Previous bonds issued through the corporation, which was created by former Mayor Rahm Emanuel, have earned higher credit ratings by giving investors a statutory lien on the city's share of state sales taxes.

Other initiatives announced ahead of Lightfoot's budget address included a proposed doubling of the restaurant tax to raise $20 million and the termination of $1.4 billion of short-term lines of credit to save about $22 million.

The mayor also proposed a new traffic congestion tax on ride-hailing companies to generate $40 million, with some of the new revenue allocated to mass transit. She outlined an effort to step up collections of unpaid taxes and licensing fees from city vendors to gain up to $25 million and is seeking state legislative approval for a graduated real estate transfer tax that would raise more money from higher-priced homes.

Results of an online survey released by the mayor's office indicated strong resistance to hiking property taxes for the budget.

Latest comments

Hahahaha. Nice try.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.