City Council Committee on Finance Update
While in the midst of budget discussions, the October Committee on Finance members met to discuss and pass several ordinances for new investments throughout the City.
The Committee approved $20,700,000 in tax increment financing assistance and bond issuances for mixed used and affordable housing projects in the 3rd, 10th, 16th, 26th, and 27th Wards. These developments will bring affordable housing, retail, a youth development and transitional shelter, and other amenities to these areas. The Committee on Finance also approved the extension of several tax increment financing districts on the south and west sides. These are now set to expire on December 31, 2034. This will help these areas continue to strengthen their commercial corridors as part of INVEST South/West while bring new and expanded businesses and housing to their neighborhoods
The Committee also approved two settlements.
The Finance Committee also passed budget items this week in preparation for a full 2023 budget vote on Monday November 7th. The November 7th meeting, like all others, are available via livestream at https://www.chicityclerk.com.
Finance Committee & Finance Team Budget Highlights
The Committee on Finance and the Mayor’s Offices of the Budget Director Susie Park, Comptroller Reshma Soni, and Chief Financial Officer Jennie Hwang Bennett have been working closely together on stabilizing, creating efficiencies and putting the City on a stronger financial path over the past three years.
This year’s bond ordinance authorizes borrowing and the Committee on Finance approved ordinances for the following this week:
$1.85 billion to fund the FY2023-2024 Chicago Works Program. In 2021, the City approved a $1.4 billion 2-year capital improvement program. Together with the current $1.85 billion authorization and the Chicago Recovery Plan, the City is investing in one of our largest capital plans and progressive neighborhood investment plans in the City’s history.
Second, we passed an ordinance to approve a $336 million Water Infrastructure Finance and Innovation Act or WIFIA loan to fund lead service line replacements. The City received low-cost federal financing provided through the WIFIA program.
Third, a $250 million extension of existing authority to finance Midway capital projects through a commercial paper program as well as new authorization for a line of credit as a mode of interim financing.
Fourth a $50 million line of credit to cover unanticipated capital needs at the O’Hare car rental facility. All of these together are improving the City’s efforts on infrastructure and financial improvements.
The successes of the finance teams have been marked by improved ratings that recognize that work. The City received an upgrade by Fitch Ratings for the first time in years. According to the City CFO Jennie Hwang Bennett in her testimony at the Committee on Finance, “Fitch started rating the City’s GO credit in 1998 and in that nearly quarter of a century, has never provided an upgrade due to improved City financials. 12-years ago, Fitch provided a global scale upgrade to the City as a part of a methodology change that affected municipal credits nationwide, but not specific to the City’s credit.”
The City also received an upgrade of the City’s O’Hare bonds by both S&P and Fitch in August. O’Hare is the only airport in the country to come out of the pandemic with 2 higher ratings than it had going into the pandemic. The City expects to save approximately $100 million in debt service for every $1 billion the City issues.
This rating upgrade is well-deserved, and highlights not only the tremendous hard work undertaken by the by the Mayor and City Council, but highlights the benefits of transparency and accountability in managing the City’s finances.
The City’s key financial accomplishments over the last three years include:
Pensions: For the first time in the City’s history, the City paid all four pension funds on an actuarially determined basis and, for the first time in 15 years, increased the funded ratio on all four pension funds. Further, the advance pension payment proposed in the FY2023 budget will accelerate the point at which the City can stabilize its pension funds by seven years.
Casino: After three decades of pursuit, the City has secured a casino operator in the City of Chicago that will generate $4 billion of financial value to the State of Illinois: $2 billion to fund up the City’s police and fire pension funds and $2 billion to the State of Illinois to support the capital plan. The casino will repatriate approximately $190 million in gaming revenues back from the State of Indiana and is expected to generate $200 million annually in revenues in a steady state. The casino will also be a job creator and is expected to generate 3,000 construction jobs and 3,000 operating jobs.
Debt: For the first time in decades, the City is now paying down the full freight of its debt annually. Since the start of the Mayor’s administration, the City will reduce debt outstanding by $747 millionby fiscal year-end 2022. This responsible debt management allows the City to make the largest infrastructure investments in its history through the Chicago Recovery Plan and the Chicago Works program without increasing the City’s debt burden.
Budget Gap: The FY2023 budget gap is the second lowest budget gap in 16 years and achieved structural balance through a reduction in reliance on one-time measures.
Water: The City has secured the first new preliminary water supply contract in three decades with the City of Joliet which will generate $1 billion of financial value and will be the second largest water partner to the City.
O'Hare: O’Hare International Airport is the only airport in the country to come out of the pandemic with higher ratings than it had going into the pandemic. The City secured three rating upgrades at O’Hare, including, two by Fitch and one by S&P on the O’Hare General Airport Revenue Bonds and the Passenger Facility Charge Bonds.
Investments: The City has made $6 billion in investments in the City’s future, including $3.3 billion in the Chicago Works Plan from 2021 to 2024, $1.2 billion in the Chicago Recovery Plan, and $1.4 billion in public and private investment commitments over the first two years of INVEST South/West. Further, given that the Chicago Recovery Plan is one of the most progressive investment programs in the City’s history, the City will be selling a portion of its upcoming bond issue to fund the Chicago Recovery Plan through an ESG bond issue with a particular focus on prioritizing Chicago based investor participation.