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.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Source : Reuters Link

Follow 3-www.NET

Category Latest Posts