Chicago City Wire

Chicago's City Council has approved a significant financial maneuver aimed at reducing the city's debt burden. In a 32-12 vote, the council authorized the issuance of $1.5 billion in General Obligation (GO) bonds and for the Sales Tax Securitization Corporation (STSC) to issue STSC bonds. This decision is part of a broader strategy to refinance or tender certain outstanding city GO bonds and STSC bonds.

The refinancing plan is expected to yield approximately $110 million in present value savings by leveraging lower interest rates and a tender process designed to buy back existing debt. Mayor Brandon Johnson highlighted the city's commitment to fiscal responsibility, stating, “This refinancing plan reflects our ongoing commitment to sound financial management. With today’s approval, we’re taking another important step forward to lowering the City’s costs and reducing pressures on the City’s budget.”

The plan involves replacing older, high-interest bonds with new ones at reduced rates, akin to refinancing a mortgage. Approximately $850 million of the city’s GO bonds will be eligible for refinancing through a call option on January 1, 2025, with an additional $500 million set for a tender offer. The projected outcome is a reduction in average interest rates from 5.62 percent to around 3.75 percent, though actual results will depend on market conditions.

Chief Financial Officer Jill Jaworski emphasized responsible fiscal management: “Our goal with every bond transaction is to be responsible stewards of taxpayer dollars,” she said. “This refinancing will help us lower debt service costs, reduce the City’s overall debt load, and directly reduce the City’s budget deficit.”

This move follows several successful refinancings earlier this year that saved millions for Chicago's Midway Airport, O’Hare Airport, water system, and wastewater system. The GO/STSC bonds are anticipated to capitalize on favorable market conditions and are scheduled for issuance in the fourth quarter of 2024.

Additionally, over 40 percent minority underwriter representation in this transaction underscores Chicago's dedication to equitable financial practices.