Dear Commons Community,
The Chicago Board of Education approved the sale of up to $1.16 billion of bonds for its cash-strapped school system and appointed new leadership. As reported by Reuters:
“The nation’s third-largest public school district is struggling with falling credit ratings, a big budget deficit and lack of an approved plan to ease escalating pension costs. The general obligation bonds will provide as much as $650 million in school facility improvements, $250 million in budget relief by restructuring existing bonds, and $300 million to convert variable-rate debt into fixed-rate bonds and pay banks to terminate swaps used to hedge interest-rate risk, according to a presentation to the board.
At a public hearing on the bonds, James Bebley, the district’s general counsel, said talks were continuing with banks over the swaps and outstanding debt. Downgrades by Moody’s Investors Service and Fitch Ratings in March triggered about $228 million in termination payments by the Chicago Public Schools (CPS) to bank swap counterparties. Moody’s cut the district’s rating to “junk” in May. Earlier this month, Standard & Poor’s dropped its rating two notches to BBB, while warning another downgrade could come without a “credible” fiscal 2016 budget.
A spending plan is expected to be unveiled in August. School officials have said the budget will rely on $500 million in pension savings that have yet to be enacted by the Illinois Legislature and will incorporate a $106 million cut in state funding.
The board also approved a new leadership team announced by Chicago Mayor Rahm Emanuel last week that includes his chief of staff, Forrest Claypool, as the district’s chief executive officer, and former electric utility executive Frank Clark to head the board. CPS has projected a $1.1 billion deficit in its fiscal 2016 budget, largely because of an approximately $675 million pension payment.”
We wish this great urban school district well as it tries to weather its financial issues.