Chicago Mayor Lori Lightfoot’s $4.4 billion 2022 bonding package heads to the City Council for a vote next week after surviving a backlash over the lack of ward-by-ward specifics about how the city would spend $660 million of recovery plan borrowing.
The bonding package, along with a $1.7 billion property tax levy that’s up $76.5 million from this year and a revenue ordinance with some fine and fee hikes, all cleared the Finance Committee Thursday.
The three provide the backbone of Lightfoot’s proposed $16.66 billion 2022 budget that relies on federal aid, growing revenues, and expense savings to wipe out a $700 million gap.
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The final budget cleared the budget committee Friday along with a revised 2021 spending plan that pays off a $450 million credit line taken out by the city last December to buy time for a federal relief package. The city otherwise planned to scoop-and-toss the debt to close a 2020 gap. The full package is set for a final vote next week.
“Current market conditions are extremely favorable for the city both from an absolute rate and credit spread perspective,” Chicago Chief Financial Officer Jennie Huang Bennett told the committee. “These conditions have created a number of refinancing opportunities to generate interest rate savings as well as lock in financing for the city’s capital plans.”
The ordinances authorize $1.2 billion of borrowing that’s about equally divided between new money and refunding revenue bonds under the city’s wastewater and water enterprise systems.
Another ordinance authorizes $1.55 billion of borrowing for O’Hare International Airport with $700 million of new money and $850 million of refunding and another $1 billion in borrowing for Midway Airport, including $100 million of new money is authorized.
The bond package also allows for $660 million of general obligation debt that would, along with a portion of the city’s $1.9 billion of American Rescue Plan Act relief, fund $1.5 billion of investments under the proposed Chicago Recovery Plan Lightfoot unveiled alongside the budget last month.
The actual size of the deals could change as Bennett said the $660 million of GOs would be tapped depending in pieces depending on project needs so some might be pushed off to future years.
The city also intends to combine its first use of that authorization with a roughly $500 million GO deal authorized with last year’s budget package for the ongoing capital plan. The O’Hare deal could increase because the city has another $760 million of existing capacity already on the books.
The city has in the past announced timelines that then saw deals pushed off into the next year but if the deals all come to fruition in 2022 it would mark the most dollar amount borrowed in a single year by the city. Chicago sold $1.7 billion of debt last year and its Sales Tax Securitization Corp. sold $1 billion. The city sold $722 million in 2019 and the STSC sold $605 million.
The 2022 transactions would follow a $1.2 billion refinancing for savings planned for late this year through the STSC Most of the savings would be captured to help balance the 2021 budget. The city also has a separate $1.2 billion of refunding capacity on the books that would be tapped to conduct a tender offer/exchange.
The bond ordinance cleared the committee but only after Committee Chairman Scott Waguespack held a brief recess that followed demands from Lightfoot’s council critics and allies alike for more information on specific recovery projects.
The recovery program lays out “buckets” of spending in areas like housing, development, infrastructure, mental health, violence prevention, and others but lacks specific ward-by-ward and individual project spending.
Multiple council members pressed Bennett and Budget Director Susie Park for more details.
“I’m not supportive of borrowing without knowing and writing blank checks,” said Alderperson Raymond Lopez.
“The market conditions are such that we should take advantage of the refinancing opportunity” but on the recovery plan borrowing “we are being asked to vote on capital funding and there’s this nebulous cloud over what exactly are the projects we are going to be funding here,” said Alderperson Brendan Reilly. “There should be a greater focus in the future in outlining projects on granular level.”
Park and Bennett told members that the level of breakdown provided was all the city currently had and that more detail would be forthcoming.
“The plan was crafted by a lot of community engagement, a lot of briefings and engagement with this body,” Bennett said.
Some council members pressed to delay a vote. Others said they were satisfied and didn’t want the vote held up.
“There are some pieces…that are really addressing some things I would call the recovery work that this city needs and extraordinary investments that have never been made” like on broadband accessibility, said Alderperson Michele Smith who represents a more affluent ward that might not see as significant of an investment as others in the recovery program.
Alderperson Pat Dowell, who heads the budget committee, noted that some additional detail had been sent late last month to members. During a brief recess those documents were again distributed and when the committee resumed, the measures passed.
Committee members did not push back on the size of the borrowing. Bennett has stressed that more than half represents refinancing of old debt for savings.
They also did not push back against the makeup of the finance teams laid out in the ordinances as Bennett highlighted a 52% participation level of minority, women-and disabled veteran underwriting, advisory, and legal teams that exceeds a 25% goal on minority and 5% women participation.
The committee also approved the property tax levy but by a narrower vote, signaling that it could see pushback during full council debate.
About $28.6 million represents new property coming on the rolls, $25 million for previously approved capital debt service, and $22.9 million for an annual inflationary increase put in place with the 2021 budget. Some council members believe the city should forego the latter piece of the hike.
Update: The story was updated with budget committee approval of the plan.