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Johnson announces plan to refinance debt; City Council to review $1.5B bond ordinance

By Jenna Carroll
Published  October 8, 2024 2:30pm CDT
Brandon Johnson
FOX 32 Chicago

CHICAGO - The Finance Committee gave the green light for the City of Chicago to issue $1.5 billion in General Obligation (GO) bonds. 

They also approved the Sales Tax Securitization Corporation (STSC) to issue bonds to help refinance or buy back some of the city's existing GO and STSC bonds.

The refinancing and bond buyback are expected to save around $110 million, based on the current market conditions.

The STSC, created in 2017, has higher bond ratings than the City’s GO bonds. Its main goal is to refinance those GO bonds, helping the city cut down on debt service costs.

The $1.5 billion GO/STSC ordinance, set to be reviewed by the City Council on Wednesday, follows responsible debt management practices, the mayor's office said. The ordinance makes clear that the entire $1.5 billion can only be used for cost-saving refinancing purposes. 

Any other use of the bond proceeds would need an amendment approved by the City Council, and the funds can’t be used for operating costs. While the authorization allows for up to $1.5 billion in bonds, the city will only issue the full amount if it leads to savings on debt payments.

"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," said Mayor Brandon Johnson. "This refinancing plan represents another important step in creating a stronger financial foundation for our city—one that benefits all Chicagoans." 

Just like a homeowner refinancing a mortgage, the city plans to issue new bonds at lower interest rates to replace the older, higher-interest ones. This will help save on costs, the mayor's office said.

On Jan. 1, 2025, $850 million of the city's GO bonds will be eligible to be refinanced through a call action.

The city also plans to use a tender process to purchase about $500 million of GO and STSC bonds and refinance those bonds for savings. 

Under this plan, the city will replace existing debt with an average interest rate of 5.62 percent with new debt at a lower rate of around 3.75 percent.

The refinancing is pending City Council approval.