In an effort to shore up Chicago's financial future and chip away at its debt, Mayor Brandon Johnson and city officials have rolled out a $1.5 billion refinancing plan that is set to save the city approximately $110 million. According to the city's announcement, the Finance Committee has given the green light for an ordinance that would empower the city to issue these bonds, with intended savings pegged to current market conditions. This comes after the Sales Tax Securitization Corporation (STSC), which totes a higher bond rating than the city's General Obligation (GO) bonds, was established back in 2017.
With the City Council review scheduled for Wednesday, October 9, 2024, the $1.5 billion GO/STSC ordinance adheres to responsible debt management practices, stipulating solely for refinancing. There can be no other use of the bond proceeds unless City Council passes an amendment, providing a check against an opaque reallocation of funds. Mayor Johnson emphasized the ordinance's focus, "The City of Chicago is committed to finding innovative and responsible ways to meet our financial challenges while prioritizing the long-term stability of our budget," while any benefits reaped from it are to spread across all demographics in the city.
Chicago's approach mirrors that of a homeowner who refinances a mortgage by issuing new bonds at more favorable interest rates to replace higher-interest ones. Upon 2025's January dawn, $850 million of the city's GO bonds will be refinanceable through a callable action. The plan also includes using a tender process to buy back an approximately $500 million in bonds, yielding significant savings by swapping debts that carry an average interest rate of 5.62 percent with new ones at a projected rate of nearly 3.75 percent.
