FOR IMMEDIATE RELEASE:
Thursday, December 8, 2016
For more information, contact:
CPS Office of Communications
CHICAGO - Chicago Public Schools (CPS) announced today that two ratings agencies rated the upcoming Capital Improvement Tax bonds investment grade, allowing CPS to achieve a lower borrowing cost. Fitch rates the upcoming capital bonds A and Kroll rates the bonds as BBB.
“These investment-grade ratings are a reflection of the strength of this credit, which have a dedicated revenue source that will be spent only on needed capital at CPS,” said Ron DeNard, CPS’ Senior Vice President for Finance. “Through Mayor Rahm Emanuel and the Chicago City Council's authorization of the Capital Improvement Tax levy, CPS is able to access much-needed capital to support investments in modernizing and repairing schools across the city.”
The Capital Improvement Tax levy is an annual property tax levy dedicated exclusively to school construction projects. In 2003, the Illinois legislature in Springfield gave Chicago the right to levy a special property tax, or Capital Improvement Tax levy, to help with school modernization. Led by Mayor Emanuel, the City followed through on this levy in the fall of 2015. The Capital Improvement Tax generates roughly $45 million annually, which will be used to repay the bonds.
The Capital Improvement Tax bonds have no impact on the District’s operating budget, which funds staff and other day-to-day expenses because this tax revenue cannot be used for operating expenses. This allows CPS to issue long-term debt for building projects without impacting classroom funding. CPS plans to finance the projects by issuing one or more series of bonds.
As CPS announced last week, proceeds from the bonds will be used to fund previously announced projects and projects in the District’s supplemental capital agenda. Additional project details can be found at cps.edu/capitalplan
The District’s maximum possible FY17 capital budget will be $938 million, the majority of which will be funded with bond proceeds secured by the capital improvement tax levy that the City Council approved in 2015. The property tax levy is authorized under state law and can be used only to fund capital projects.
Background on Structure of Bond Offering
- CPS’ official statement on the bond sale provides information that would be material to investors in all respects. This information is substantially similar to the information provided to investors in previous bond issues in 2016, both 2016A and 2016B.
- For the CIT bonds, rating agencies pointed to their strength because of the fact that regardless of challenges with CPS’ operating budget, the bonds will be repaid with a specific revenue source that exists independently of the District’s operating budget. CPS provided two separate legal opinions confirming this fact.