Chicago Could Save Big, Thanks To Small Provision In State Budget
Chicago’s bonds are rated junk, so the city pays much higher interest rates — like 3 percentage points higher — than more-vanilla borrowers. When borrowing hundreds of millions at a time, that’s expensive.
On page 711 of the new Budget Implementation Act, state legislators included a section that could help.
It would allow Chicago and other cities to set aside funds from the state — like their share of state sales taxes — to pay debt. It’s a guarantee for the lender. This money’s for them.
“Investors tend to like these kinds of structures,” said Richard Ciccarone, a bond expert who is president of Merritt Research Services. “It gives them more confidence about the repayment.”
Using that provision could allow the city to borrow at lower interest, and save taxpayers money.