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  #321  
Old 12-05-2017, 05:56 PM
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https://fixedincome.fidelity.com/ftg..._110.1#new_tab

Quote:
Chicago wants to shake COFINA comparisons ahead of securitization

Spoiler:

CHICAGO – Chicago hits the market this week with its inaugural sales tax securitization bonds, pushing hard to distinguish the new credit from its own battered bond ratings and quash comparisons to Puerto Rico’s bankruptcy-tainted sales tax credit.
The city – through its new Sales Tax Securitization Corporation – will bring $575 million of taxable and tax-exempt paper to refund existing sales-tax backed bonds. Retail orders and indications of interest on the taxable piece are set for Tuesday with the institutional pricing set for Wednesday, though the finance team on Monday was considering Monday bringing the entire deal Tuesday.
The deal is led by Jefferies and Rice Financial Products Co. In early 2018, the corporation will return to current refund $905 million of GOs.
Chicago held investor meetings in Chicago, Boston, and New York City last week during which Chief Financial Officer Carole Brown sought to make the legal case for the bankruptcy-remote structure that garnered two triple-A ratings, while and stressing differences between Chicago's securitization vehicle and the Puerto Rico Sales Tax Financing Corporation.
While Fitch Ratings issued a report “Chicago's Securitization Program a Far Cry from Puerto Rico's COFINA,” other analysts and buyers remain skeptical that the new credit won’t be dragged through the mud should Illinois eventually adopt a Chapter 9 statute and Chicago lands in bankruptcy.
“I was skeptical going in and I’m still skeptical,” although there are structural and legislative barriers in place and the city is far from bankruptcy, said Howard Cure, director of municipal bond research at Evercore Wealth Management LLC, who attended the New York meeting. “It should work right up until the time the city of Chicago is permitted to declare a bankruptcy. Then I think nothing matters but what a judge thinks.”
Concerns aside, the bonds offer an attractive buying opportunity for some given the triple-A ratings and “wide spread” to the AAA they are expected to offer, Cure added.
Fitch said in its special report last week that the COFINA dispute was not relevant to its analysis. The legal structure is somewhat similar but the key issue in dispute in Puerto Rico is whether the legislature had the legal authority under its constitution to carve out the revenues and hand them over to an instrument of the commonwealth.
“Illinois’ constitutional authority to define the powers of its municipalities is not subject to dispute,” Fitch said. State legislation allowing home rule units of government to securitize revenue streams that flow through the state passed the General Assembly over the summer at the city’s urging. The city later established the new special purpose entity and authorized up to $3 billion of borrowing under the new structure.
Puerto Rico collects its sales tax and remits it to COFINA “enabling the commonwealth to interrupt the flows by simply retaining them as part of a strategy to contest the framework,” Fitch wrote. “In the Chicago transaction, the taxes are collected by the state and remitted to the corporation’s trustee. The city cannot commence the dispute by simply withholding the funds from the corporation.”
COFINA’s bonds have been declared in default and are currently rated between D to Ca. Fitch rated the Chicago bonds AAA.
The city’s share of sales taxes that flow from the state -- $660 million in 2016 – will now go directly from the state to the corporation. After deductions to cover debt service and operations, the revenue will flow to a residual account that can be returned to the city. The legislation, ordinance and bond documents offer protections such as a statutory lien and non-impairment provisions on the pledged revenues.
Fitch said it looked at case law to weigh the potential outcome should creditors challenge whether the city’s sale of the assets represents a true legal sale and whether the separate legal status of the corporation could be ignored and assets and liabilities consolidated with those of the city.
“This structure is within the precedents noted in the legal opinion that would treat it as a sale structured by the parties and is blessed by the specific state legislation” which amended the Illinois Municipal Code to empower a municipality to sell certain tax revenues in a defined structure and retain a residual interest in the flows, Fitch said.
Prior case law – including a case challenging New York’s legal ability to allow New York City to sell its tax revenues on the argument it impaired existing creditors’ contractual rights – failed. The court found general creditors lack a claim on any specific revenues or a right to insist that the city have any particular forms of revenue.
Market participants acknowledge the protections but question just how airtight the structure will be if it is tested, and that will weigh on valuations.
“No Chicago creditor should want to find out what happens to STSC bonds, GO bonds, pensions, and other liabilities in a future bankruptcy, if such is ever permitted by a change in state law,” wrote Lisa Washburn, a managing partner at Municipal Market Analytics, in a recent weekly outlook.
“While structure and non-impairment language protects bondholders in non-bankruptcy situations, STSC bondholders should assume some risk of being COFINA’d if Chicago does ultimately find itself in Chapter 9. That is, being sued by the city itself, its pensioners, and GO bondholders for access to previously pledged sales taxes,” she added.
Washburn dived into a comparison of programs used by Chicago, COFINA, New York City, and Philadelphia. The Chicago structure and transaction “contains the most structural protections and buzz words of the four entities,” she found.
“While great effort was employed to insulate COFINA from the Commonwealth’s financial situation, the STSC seeks to go a step further, buttoning up perceived legal ambiguities that now threaten repayment or repudiation,” she added.
A key difference between the COFINA, Philadelphia, and New York structures is the ongoing state oversight provided by the state over the latter two. COFINA lacked the oversight and its authority to issue debt was expanded from refinancing to deficit financing.
“The difference in outcomes is striking. Philadelphia and New York City are now solid investment grade ratings," she wrote. "Puerto Rico is in default and COFINA bondholders, who are protected by what was considered to be a state-of-the-art legal security at the time of sale, are now being sued by the commonwealth and GO bondholders for the return of ostensibly ‘sold’ sales tax receipts.”
Chicago could tap a subordinate lien to issue additional debt beyond the $3 billion authorized by the City Council, although council approval would be needed.
“Chicago’s fiscal future hinges on discipline: With this new financing, city stakeholders become even more critically reliant on the current and all future administrations exercising fiscal discipline,” Washburn wrote.
Along with Fitch, Kroll Bond Rating Agency assigns its AAA rating to the bonds. S&P Global Ratings rated the program AA. All three rating agencies rate Chicago’s GOs in the triple-B category. Moody’s Investors Service which was not asked to rate the new corporation has the city’s GO in junk territory.
Bankers have told the city that it can keep spreads to less than 100 basis points above Municipal Market Data’s top-rated benchmark. A pre-marketing pricing scale put spreads on the $175 million tax-exempt piece at a 30 to 45 basis points over Municipal Market Data’s top-rated AAA benchmark. The $400 million taxable piece offered spreads to Treasuries of 70 to 100 basis points. Chicago GOs have recently traded at a 170bp spread, and it paid a record spread of more than 300bp on its last GO sale.

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  #322  
Old 12-06-2017, 10:57 AM
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https://www.bloomberg.com/news/artic...d-debt#new_tab

Quote:
Chicago Issues AAA-Rated Debt Despite City's Junk-Rating
By Elizabeth Campbell
December 5, 2017, 8:30 AM EST
New debt will have first claim on sales taxes from Illinois
Borrowing is first stage of planned $3 billion refinancing

Spoiler:
Chicago will start selling as much as $575 million of investment-grade-rated debt that’s backed by a dedicated share of sales-tax revenue it receives from Illinois, insulating bondholders from the city’s financial strains.

The offering is the first by the Sales Tax Securitization Corp., which was created after Illinois enacted a budget this year that allows municipalities to sell debt backed by state funds they received. That added security allowed the bonds to receive an AAA grade by Fitch Ratings, nine steps higher than Chicago’s general obligations.

Related Story: Bondholders Fret as Alchemy Turns Chicago’s Junk to Gold

The bonds, which will price as early as Tuesday, are the first in Chicago’s plan to refinance as much as $3 billion of debt through the corporation. That will save the city an estimated $94 million, according to city documents.

“The corporation is a separate corporate existence and is bankruptcy remote from the city,” Carole Brown, Chicago’s chief financial officer and the president of the corporation, said in a roadshow presentation to investors.

That’s reflected in the view of credit-rating companies. S&P Global Ratings deems the securities AA, the third-highest rating and five levels higher than the city’s general-obligation bonds. Fitch considers the bonds AAA, even though it rates Chicago’s general obligations one step above junk. Moody’s Investors Service, which has already dropped the city one step below investment-grade, wasn’t asked to rate the new bonds.

What Analysts Say:

Conning & Co.: This kind of borrowing is a "smart" move by city leaders, according to Paul Mansour, head of municipal research at Conning, which oversees about $9 billion of state and local debt, and is considering buying the deal. “This makes a lot of sense because you’re not taking money out of the system. The residual revenues will flow back to the city. You’re just creating a better credit that lowers interest rates overall for the city and therefore in and of itself is a good thing,” Mansour said.

Wells Fargo Asset Management: The deal should “come tighter” than the G.O. bonds, said Dennis Derby, a portfolio manager at Wells Fargo Asset Management, which holds $41 billion of municipal debt, including Chicago’s. “It’s checking off all the boxes that bondholders want,” he said, adding that the firm is considering buying. “They want a separate and secured revenue stream, less exposure to the general-obligation credit and strong coverage mechanisms.”

Gurtin Municipal Bond Management: Even though it looks like the city went out of its way to protect bondholders “as best they could,” the firm still isn’t buying, said John Humphrey, the Chicago-based head of credit research for Gurtin, which oversees about $10.1 billion of state and local debt. “It’s an untested model," he said. In "bankruptcy while not allowed today, it’s still unclear how this would be treated."

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Old 12-18-2017, 11:55 AM
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https://chicago.suntimes.com/chicago...the-watchdogs/

Quote:
Rahm’s trust a bust? Fails to raise a dime but has cost taxpayers $5M
Spoiler:
Since the J. Geils Band left the stage on Dec. 19, 1981, Chicago’s fabled Uptown Theatre has remained dark, waiting for someone with deep pockets to pay for a massive renovation.

Jerry Mickelson, the legendary concert promoter who owns the theater, thought he’d found an angel: the Chicago Infrastructure Trust, a not-for-profit agency Mayor Rahm Emanuel created with great fanfare five years ago to find private investors willing to bankroll public improvement projects.

Three years ago, Mickelson struck a deal to give up ownership of the Uptown as part of a $125 million plan to restore the cavernous theater to its original opulence — a proposal to be partially financed with a $10 million grant from the state of Illinois and $5 million from the city of Chicago.

But Gov. Bruce Rauner put the kibosh on a number of state grants, including the Uptown deal, which had been shepherded through the Illinois Legislature by Senate President John Cullerton, a partner in a law firm that Mickelson uses to challenge the property taxes on the padlocked theater.

Then, City Hall pulled the plug on the project, scrapping the signed deal with Mickelson and also dumping the trust’s chief executive officer and replacing its entire staff.


After rehab plan failed, Jerry Mickelson still hopes to reopen the Uptown Theatre with a smaller investment of taxpayer dollars. | Santiago Covarrubias / Sun-Times

Mickelson says he still dreams of reopening the theater under a scaled-down rehabilitation plan that’s awaiting approval — and some taxpayer money — from City Hall. The plan still has it as the center of an entertainment district with the Riviera Theatre and the Aragon Ballroom, an idea Emanuel has publicly embraced.

But if the Uptown ever reopens, it will be without the Chicago Infrastructure Trust playing any role in the production, according to City Hall.

The Uptown Theatre could have been the signature achievement of the grand plans Emanuel announced five years ago, with former President Bill Clinton’s endorsement, to persuade private investors to bankroll billions of dollars in public works projects across the city.

The bold idea was that private financing could be found for much-needed, big-ticket improvements for the city, making it possible to get more of them done sooner and sparing taxpayers from having to foot the bills. City Hall says that still can happen.

But the infrastructure trust has fallen short of the expectations the mayor laid out. It has yet to raise a dime in private financing for a single public works project, records show. At the same time, it has cost Chicago taxpayers more than $5.1 million to pay for its handful of employees, offices on Wacker Drive, consulting fees and other expenses.

Rather than disband his taxpayer-funded not-for-profit after failing to attract the private investors Emanuel said it would, the mayor shifted course, changing its mission after the Uptown deal fell apart two years ago. He handed it procurement and management tasks — work that otherwise would be handled by city agencies or the Chicago Public Building Commission, which is headed by the mayor. Now, the trust has been cut in on specific city projects.

Officials say the infrastructure trust helped pick a contractor to upgrade Chicago’s 278,000 streetlights. The city’s Department of Transportation has most of the responsibility for that work, though. The transportation department signed the contract, determines the schedule for replacing the lights and pays the bills.

The trust also has taken part in the process of selecting contractors to build Emanuel’s planned $95 million training academy on the West Side for police officers and firefighters, as well as having a role in the relocation and construction of facilities to repair the city’s fleet of trucks.


An artist’s rendering of the city of Chicago’s planned $95 million public safety training campus on the West Side. | City Hall

All are jobs that might otherwise have been done by the Chicago Public Building Commission, which has built Chicago’s police stations, firehouses and schools. And while the trust is helping to select the contractors, the designs of those facilities will be determined by the agencies that will use them, not by the trust or its handful of employees.

A top city official, who spoke only on the condition of anonymity, wonders why the mayor hasn’t shut down the trust.

“There’s no excuse for the mayor to avoid closing down this thing that’s been a complete failure,” the official said. “They’ve done nothing that can’t be done by [the Department of Fleet and Facilities Management] or the Public Building Commission.”

Other current and former officials say the trust still provides benefits to the city.


Former Deputy Mayor Steve Koch. | Fran Spielman / Sun-Times

“You’ve got to take a step back and think about why the mayor wanted to set this up,” Emanuel’s former deputy mayor, Steve Koch, said in an interview on his last day in office this summer. “There were some growing pains. It’s a start-up. . . It works effectively across city departments. It can work with sister agencies. And we get the benefit of having an outside board that gives good advice without engaging a lot of expensive experts.”

The agency’s five-member staff is overseen by a seven-member board headed by Emanuel’s appointed city treasurer, Kurt Summers. The board includes Ald. Matt O’Shea (19th), four business leaders and Jorge Ramirez, president of the Chicago Federation of Labor, which is an investor in the Chicago Sun-Times. There’s also a four-member advisory board that includes Ald. Michael Scott Jr. (24th).

Insiders who have been involved with the trust say that some investors were leery of investing in a not-for-profit to fund city projects, rather than funding them by buying municipal bonds issued by the city, which are exempt from taxes and whose repayment is guaranteed by Chicago taxpayers.

Investors might also have been skeptical as a result of the criticism that City Hall took after the Daley administration signed long-term leases with private companies to operate parking meters and the Chicago Skyway, which cost the city long-term while providing a short-term boost to the budget — and hit drivers with sharp increases in parking fees and tolls.

Emanuel had been in office less than a year when he announced the creation of the trust amid fanfare in March 2012 at a news conference with Clinton, his former boss. This trust would tap a pool of wealthy investors to fund infrastructure projects that would create 30,000 jobs within three years, Emanuel told The New York Times.

The mayor rattled off a host of ideas the trust might pay for, among them renovating 100 CTA stations, adding 180 acres of parkland and replacing or repairing miles of leaky water mains.

“The Chicago Infrastructure Trust will bring additional resources to stimulate public and private investment in our infrastructure, create thousands of jobs for Chicagoans and ensure that our residents have a world-class quality of life,” Emanuel said.


Stephen Beitler. | LinkedIn

It took City Hall nearly a year to find someone to run the agency — Stephen Beitler, a venture capitalist who had served as a lieutenant colonel with the U.S. Army’s Special Forces. Under Beitler, the trust took over the project the Public Building Commission had begun to install new lights, windows and other energy-efficient projects at City Hall and in 59 other buildings, including police stations and libraries.

The trust financed the work with a $12.2 million loan from Bank of America. The 15-year loan is being repaid with money City Hall says it’s saving through lower energy bills. The city says it’s saved $2.3 million so far.

Beitler’s team also helped the CTA study financing options for installation of 4G cellphone service in the subways — a project that cost the transit agency $28 million, about 90 percent of which has been reimbursed by cellular companies, according to the CTA.


The Chicago Infrastructure Trust helped the CTA review financing possibilities for installing 4G cellphone service in the subways. | Sun-Times files

The CTA paid the trust $200,000 for its work, and the state gave the trust $195,000 for the energy efficiency program — the only payments the trust has received so far outside of the money from City Hall.

By 2015, Beitler and his team had as many as 200 ideas on the drawing board. Among them: expansion of the CTA Red Line. Redevelopment of city-owned vacant land. Energy-efficient streetlights. An express train to O’Hare Airport.


The Uptown Theatre in its heyday. | Sun-Times files

But the most glamorous project was the proposed restoration of the Uptown Theatre, a Roaring ’20s gem owned by Mickelson, co-owner of Jam Productions, which brought in musical acts like the Grateful Dead, Bruce Springsteen and Prince to play the 4,381-seat venue.

The Uptown closed after a Jam-produced concert by the J. Geils Band 36 years ago because it needed repairs. It never reopened, falling further into decline. Chandeliers and other lighting fixtures went missing. There’s water damage from pipes bursting when the heat was turned off three winters ago.

Mickelson bought the theater at a court-ordered sale in 2008 for about $2.1 million, according to documents his lawyer Patrick Cullerton, the Senate president’s brother, has filed with the Cook County assessor’s office seeking a tax break.

Mickelson, the city’s best-known concert promoter, has spent years trying to revive the grand theater, which is on the National Register of Historic Places.


The grand lobby of the Uptown Theatre was part of the experience when it opened in the 1920s.

He struck a deal to sell the theater to Emanuel’s trust for $5.6 million, according to a contract signed Jan. 30, 2015. It gave Beitler several months to evaluate the theater and the proposed restoration, whose price tag reached $125 million.

Under the trust’s plan, Jam would again stage concerts at the theater. But to make the project viable, Beitler’s team also wanted more going on there, including a giant, moveable IMAX screen showing movies on days without live entertainment. Seven movie theaters, each seating 42 to 104 patrons, would open in the basement of the seven-level theater. And a rooftop deck would be added.


By 1998, the once-grand Uptown Theatre had fallen into disrepair. | Sun-Times files


The Uptown Theatre, seen here in 1998, closed after a J. Geils Band concert 36 years ago because it needed repairs. It never reopened, falling further into decline. | Sun-Times files

For months, Emanuel’s trust worked with architects and contractors, while seeking financing from a variety of sources — a bank loan, tax credits, crowd-funding, tax-increment financing money from City Hall, a state grant and the federal government’s EB-5 program, which gives permanent visas to foreigners for investing in economic development projects that create jobs in the United States.

Five days after signing the contract, Mickelson emailed Lori Healey, who was then president of Tur Partners, a Chicago firm headed by former Mayor Richard M. Daley that has federal approval to raise money from foreign investors under the EB-5 program, about financing the Uptown renovation. Healey, who now runs the Metropolitan Pier and Exposition Authority, the government agency that owns McCormick Place, says she never discussed the project with the trust.

By the spring of 2015, Rauner had blocked John Cullerton’s $10 million grant for the Uptown.


Senate President John Cullerton. | AP

The Senate president declined to discuss the grant. And his staff refused to release any emails or correspondence he had with Mickelson or his law partner and brother, who has been the Uptown’s property-tax lawyer for years.

“The information you seek is protected by legislative immunity,” according to a letter from Cullerton’s office.

Three months after Rauner’s action, Mickelson emailed Emanuel on May 6, 2015, appealing for money, according to city records.

“Steve Beitler told me he can get $45 M from EB-5,” he wrote. “With at least another $45 M from other sources there appears to be a minimum of $90 M available for the Uptown Theatre restoration. In order to secure the New Market Tax Credits this year Steve needs to submit full architectural renderings and accurate restoration cost estimates with his application before the allocation is no longer available. He needs at least $5 million immediately in order to pay for the renderings and cost analysis.”

It’s unclear whether Emanuel responded. But the city never came up with the money. And Koch, then deputy mayor, began questioning the cost of the project, emails obtained from City Hall through a public records request show.


Leslie Darling canceled the contract to buy the Uptown Theatre. | Chicago Infrastructure Trust

By July 2015, City Hall announced that attorney Leslie Darling, a top assistant in the city’s law department, would replace Beitler. The trust’s staff also was replaced. New board members were appointed.

And Darling, whose salary as executive director is $175,000 a year, canceled the contract to purchase the Uptown, according to a letter she sent Mickelson on Nov. 18, 2015.

Summers said the Uptown Theatre was one of several projects he and the new board canceled.

“I had a concern coming in that a number of projects in the pipeline were all over the place, and there was no common theme,” Summers said. “Does this fit with our purpose? Do we have the expertise? . . . Questions like that made us cease several projects.”

Today, City Hall says the trust is helping with five city projects:


The Chicago Infrastructure Trust offices at 35 E. Wacker. | Rich Hein / Sun-Times

• The Home Buyer Assistance Program, which gives grants for down payments or closing costs. The program has doled out 169 grants ranging from $2,503 to $25,020, a total of more than $1.38 million, all funded by City Hall, to homeowners who have borrowed a total of $24.3 million from approved lenders. The trust doesn’t handle the applications. The lenders determine who’s eligible.


One of Chicago’s new LED streetlights. | Kevin Tanaka / Sun Times

• The Smart Lighting Project, operated by the city’s transportation department to replace 278,000 sodium lamps that light the city’s streets, alleys and parks with LED bulbs under a $150 million contract with Ameresco. So far, 12,400 lights have been replaced. The trust helped solicit bidders. The contract is now the subject of a federal lawsuit. Neptun Light of Lake Forest sued last month, accusing the city, the trust and Ameresco of skewing the bidding process to favor bulbs made by General Electric. Darling declined to talk about the suit.


New LED streetlights line 59th Street in Hyde Park. | Kevin Tanaka / Sun-Times

• Construction of truck-repair facilities for the Department of Fleet and Facilities Management, which will vacate a massive warehouse on Goose Island so the city can sell the property to developer Sterling Bay Co. for $104.7 million. The trust helped select AECOM, which will work with city officials to design a 155,000-square-foot shop at 210 W. 69th St., a 31,000-square-foot shop at 4241 N. Neenah and a 2,500-square-foot fueling station on Goose Island.

• The training academy for police officers and firefighters on 30 acres at 4301 W. Chicago, which City Hall has agreed to buy for $9.6 million from a company whose owners have contributed $11,000 to Emanuel’s campaign fund. The trust is working with the fleet and facilities management, fire and police departments to pick a developer to design and build the academy, estimated to cost $95 million.

• The O’Hare Express, a long-discussed idea for a high-speed rail between the airport and the Loop. The trust and City Hall are soliciting proposals to finance and run a system that could make the trip in no more than 20 minutes and charge riders less than the price of a cab or ride-sharing company.

If the city finds someone to build, finance and operate the O’Hare Express, that would be the only project that would fulfill the mayor’s vision of having private investors bankroll a public works project.

Kurt Summers
City Treasurer Kurt Summers, who also chairs the Chicago Infrastructure Trust, says he questioned the proposed Uptown Theatre rehabilitation and other projects that initially were considered. But he sees benefits from having the trust. | Sun-Times files

Still, Summers said of the projects, “These things wouldn’t have gotten done without the infrastructure trust,” pointing out that officials had been talking about upgrading streetlights for 15 years.

At a meeting earlier this month of the trust’s board, one member asked how the staff’s five employees could oversee all of these projects. George Marquisos, the trust’s managing director, replied: “These are not [trust] projects. These are city projects. We are program managers. Not everything is done by our hands.”

As for the Uptown Theatre, Mickelson is now working with Fairpoint, a development company founded by Scott Goodman, a former partner in Sterling Bay. Mickelson and Goodman have submitted an application to the city Department of Planning and Development that asks for city funding from the Lawrence/Broadway tax-increment financing district. Mickelson won’t say how much money they are seeking, and City Hall won’t release the pending application.

Mickelson said the latest renovation proposal would cost as much as $70 million.

“Some of that will depend on how much money we can cobble together,” he said, pointing out that taxpayers have helped fund the renovation of other theaters, including the Chicago Theatre in the Loop.

“I’d like to get this going as soon as possible,” Mickelson said. “We have to have other sources nailed down.



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  #324  
Old 01-02-2018, 05:17 PM
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cash flow!

http://www.chicagobusiness.com/artic...gnews-20180102

Quote:
Cook County gets close to $1 billion in property tax prepayment rush
Spoiler:
With a few more checks to arrive in the mail, Cook County so far has collected nearly a billion dollars from property owners rushing to preserve their federal income tax deductions by prepaying county property taxes.

As of midday today, a total of $757,023,249.27 in payments that ordinarily wouldn't be due for three months has arrived, according to Cook County Treasurer Maria Pappas, who spent her New Year's Eve personally accepting payments from those who stopped by her office instead of filing electronically. "It's absolutely amazing."

Pappas intends to parcel out the loot in checks that will go out on Jan. 18 to various taxing bodies that actually imposed the levies.

CHICAGO PUBLIC SCHOOLS


The biggest single winner is Chicago Public Schools, which will get roughly $220 million, Pappas says. Chicago is in line for $112 million, Cook County for $46 million and dozens of school districts around the county for most of the rest.

Had there been no prepayment rush, the taxing bodies still would have received the money. But not "until April," Pappas said.

The early (if temporary) windfall will be particularly helpful for CPS, which has faced sharp liquidity pressures in recent years. A spokesman offered no immediate answer to what the district will do with the cash, but the early payments should allow CPS to pay some bills earlier than expected and shore up its bank balance.

Last year at this time, Pappas processed only $14 million in prepayments. But under the new GOP tax bill that passed Congress, the deduction for state and local taxes will be capped at $10,000 a year. So many taxpayers paid early, hoping to expand their deduction for 2017 tax returns that have not yet been filed.

In an interview, Pappas also said that she expects to post by June final tax bills that are just being mailed out and will not be due until August. But I wouldn't expect another prepayment stampede then.
See, they didn't need the soda tax after all! They got early money!
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Old 01-10-2018, 02:05 PM
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COOK COUNTY

https://fixedincome.fidelity.com/ftg..._110.1#new_tab

Quote:
Persistent pension pressures trigger a negative outlook on Cook County
Spoiler:
CHICAGO – Persistent pension pressures prompted S&P Global Ratings to shift its outlook on Cook County, Illinois’ general obligation rating to negative from stable ahead of its plans to refund $100 million next week.

The rating remains AA-minus.

"The negative outlook reflects our view that despite the strides the county has made to improve the funding of its pension liabilities, including passing a sales tax to support payments above the state's statutory requirement, the pressures the low pension funding levels put on the county's operations could negatively affect the rating," said analyst Lisa Schroeer.

Loop Capital Markets is the bookrunning senior manager on the deal that will refund 2006 GO paper. Columbia Capital Municipal Advisors and Phoenix Capital Partners are advising the county. Chapman and Cutler LLP and Reyes Kurson Ltd. are bond counsel.

The offering includes a refunding which defers principal and front-loads savings in the near years at the expense of outer years, Fitch Ratings said of the transaction.
Fitch on Monday affirmed its A-plus rating and stable outlook. Moody’s Investors Service affirmed its A2 rating and stable outlook last week.

The bond structure reflects the ongoing implementation of a debt management plan launched in 2016 that limits the rise in debt service cost to no more than 2% including new money issuance.

“The expected savings of $2.5 million from the strategic restructuring will allow the county to continue to implement that debt structure and keep the rise below the 2% target in the coming years,” said Ted Nelson, spokesman for the county’s chief financial officer, Ammar Rizki.

The county’s $5.2 billion fiscal 2018 budget was pressured by the board’s repeal in October of a sweetened beverage tax. County board president Toni Preckwinkle and commissioners agreed to spending cuts to offset the loss of $200 million in revenue.

"The county's efforts to establish a balanced budget after the sweetened beverage tax repeal, in our opinion, demonstrate a dedication to maintaining fiscal balance, which we view as a key factor supporting the rating given the pension burden," Schroeer said in the S&P report. The county's strong economy and reserve levels also support the rating.

The county, which covers Chicago and its neighboring suburbs and is the second most populous county in the nation, has about $3 billion of GO debt and $269 million of sales tax debt.

“While we support S&P’s, Fitch’s and Moody’s affirming our rating we are disappointed with S&P’s change of outlook,” Nelson said. “The county will continue to aggressively confront our challenges while working to responsibly ensure long-term financial stability.”

Challenges on Cook County's horizon include federal efforts to repeal the Affordable Care Act which has helped reduce the county’s subsidies to its public healthcare system, Fitch said.

A cut in supplemental pension payments could also strain the rating, Fitch said. The county made supplemental contributions of $270.5 million in fiscal 2016 and $353.8 in fiscal 2017 above its statutorily set levels.

Another supplemental contribution of $353.4 million is planned for fiscal 2018, which should bring total payments to about 80% of the actuarially determined contribution level. Future supplemental payments are not reflected in the pension system’s reporting because the county still needs state legislative approval to codify the new funding scheme into law.

The county had $7.238 billion of unfunded liabilities, including retiree pension healthcare obligations, for a funded ratio of 56.7% in 2016, compared to $7.241 billion and a funded ratio of 55.4% in 2015. Applying newer accounting rules and using a lower discount rate, the county’s net pension liabilities totaled $14.124 billion in 2016.
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Old 01-15-2018, 12:12 PM
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Quote:
Chicago's securitization bonds face another test of their market appeal
Spoiler:
CHICAGO – Chicago’s Sales Tax Securitization Corp. bonds should find a welcome reception when the credit returns to the market Wednesday with a follow-up to its December debut.

While the city’s own general obligation ratings range from a low to junk to the high triple-B category, the $795 million of STSC paper carries a AA rating from S&P Global Ratings and AAA ratings from Fitch Ratings and Kroll Bond Rating Agency. All assign a stable outlook.

The paper is apt to be relatively cheap for the rating level because of the penalty the market imposes for the city and state’s fiscal woes and weak general obligation ratings, despite the structure’s insulation from the city’s corporate fund and its label as a bankruptcy-remote structure.

“They are bringing a good-sized deal with a good rating and they are bringing bonds where people want them for maximum yield,” Brian Battle, director of trading at Performance Trust Capital Partners, said referring the bulk of the sale in two terms on the long end.

The second outing could also help move some buyers sitting on the fence.

“You won’t be the first one buying a new name and you know the market can clear the bonds,” Battle said.

While so far there’s been little change in the market, Battle said many will be watching for the continued participation of C corporations given their reduced tax rates under the tax package President Trump signed in December and whether it will dampen interest on the long end.

Chicago had fortuitous timing in December as it priced on a day when yields were falling, while yields are currently up.

“The market has obviously been choppier over the last couple days but the city should benefit from a lack of supply so it will have the market’s attention,” Adam Buchanan, a senior vice president in institutional sales and trading at Ziegler, said Friday.

The fixed-rate bonds mature serially from 2031 to 2038 with most of the debt in term bonds tentatively set for $168 million due in 2043 and $431 million due in 2048. The inaugural sale of $744 million in December refunded the city’s sales tax bonds. The new deal refunds city GOs.

Goldman Sachs (GS) is running the books with Cabrera Capital Markets LLC in the secondary spot and four other firms participating in the underwriting syndicate. Columbia Capital Management and Swap Financial Group are advising the corporation.

Nixon Peabody LLP and Golden Holley James LLP are bond counsel. Mayer Brown LLP is counsel to the corporation and Cotillas & Associates is special disclosure counsel to the STSC. Chapman and Cutler LLP is special counsel to the city and Kutak Rock LLP is underwriters counsel.

The city sought to highlight the structural strengths.

“The agreement between the city and corporation provides an absolute and unconditional assignment and true sale of sales tax revenues and includes a non-impairment covenant of the city,” Carole Brown, the city’s chief financial officer and president of the STSC, said in an investor presentation about the transaction.

Brown and the finance team have beaten the drum on the legal case for the bankruptcy-remote structure and differences between Chicago's securitization vehicle and the Puerto Rico Sales Tax Financing Corporation, issuer of COFINA sales tax debt that became entangled in Puerto Rico's Title III bankruptcy process.

Some market participants have warned that the sturdiness of such structures can’t be known until tested in the courts, citing the COFINA bonds. Some also warn that the new structure could be abused by the city if it decides to add to its debt burden and they worry it hurts the value of existing GO holdings and damages pensioner rights should the city face future distress.

Those worries took a backseat to the market’s thirst for paper on the December deal that offered $175 million of tax-exempt paper and $400 million of taxable securities. It was five times oversubscribed with more than 70 traditional and non-traditional municipal investors, allowing the city to pare down initial yields.

The spread on the 10-year tax-exempt bond landed at a 23 basis point spread to the Municipal Market Data’s AAA benchmark and five bps over the AA. That compares to the secondary trading level of 170 bps on the city’s GOs.

The city’s share of sales taxes that flow from the state -- $660 million in 2016 – now goes directly from the state to the corporation. After deductions to cover debt service and operations, the revenue will flow to a residual account that can be returned to the city. The state legislation, ordinance and bond documents offer protections such as a statutory lien and non-impairment provisions on the pledged revenues.

Chicago last year sought out the state legislation to allow home rule units to establish such special entities to securitize revenue streams that flow from the state as a means to bypass its weak ratings and lower debt service costs. The city’s 2018 budget relies on about $90 million in debt savings from refundings under the program.

A second home rule municipality – Bridgeview – recently established a special entity and securitized its sales tax revenues. It only received a BBB-plus rating from Fitch because its pledged revenues lack the same healthy characteristics as Chicago.

The structural protections provide the underpinning for Kroll’s top rating. Chicago deep and diverse economic strengths, the broad base of goods and services included in the pledged revenues combined with a long track record of collection and distribution, and the four times coverage requirement for future issuance add to the credit’s strengths.

Kroll said a primary credit concern is the “high overall sales tax rate in the city” that “may weaken growth of the pledged sales taxes.”

After the sale, the city has room to issue about $1 billion more of senior lien debt before bumping up against the four times coverage requirement. The city could use a subordinate lien but has no plans to do so, Kroll said. The City Council has authorized up to a total of $3 billion of issuance.

“The bankruptcy-remote, statutorily defined nature of the issuer and a bond structure involving a perfected first lien security interest in the sales tax revenues are key credit strengths that lead Fitch Ratings to consider the corporation's credit quality as distinct from the city of Chicago,” Fitch wrote in its review.


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  #327  
Old 01-17-2018, 07:13 PM
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https://www.reuters.com/article/us-c...-idUSKBN1F62S4

Quote:
Chicago postpones $898 million bond sale, eyes new structure

Spoiler:
CHICAGO (Reuters) - Chicago on Wednesday postponed an $898 million bond sale until next week at the earliest, citing weaker market conditions and the possibility of restructuring the deal to include taxable debt.

The revenue bond issue, which topped this week’s $3.45 billion supply calendar in the U.S. municipal market, was aimed at refinancing some of Chicago’s outstanding general obligation debt through a newly created Sales Tax Securitization Corporation.

Chicago Chief Financial Officer Carole Brown pointed to a weaker market tone and the fact that ratios between yields on tax-exempt muni bonds and comparable taxable U.S. Treasuries have risen since the city sold the first $743.7 million of bonds through the corporation in early December to refinance outstanding sales tax revenue debt. The ratios gauge the expensiveness or cheapness of munis versus Treasuries.


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“We have the flexibility and the time to possibly evaluate some alternative structuring options and make sure we are offering the appropriate deal to the market given the current market environment,” she said in a telephone interview.

While the deal was meant to refund outstanding GO bonds callable within 90 days, the city could add a taxable component to refund debt callable beyond 90 days, according to Brown. The new federal tax law eliminated tax exemption for advance-refunded munis.

The tax-exempt bond deal was initially structured with serial maturities from 2031 through 2039 and a term maturity in 2042.

Chicago created the sales tax securitization corporation last year to refinance up to $3 billion of its sales tax revenue and GO bonds, and produce an initial $94 million in savings for the city’s fiscal 2018 budget.

A chronic structural budget deficit, as well as a huge unfunded pension liability that totaled $35.76 billion at the end of 2016, have led to low credit ratings and increased borrowing costs for the nation’s third-largest city.

The corporation is pledging Chicago’s state-collected sales tax revenue to pay off the new bonds. Investors will get a statutory lien shielding the debt from municipal bankruptcy, which is not allowed under Illinois law.

The bonds are rated AAA by Fitch Ratings and AA by S&P Global Ratings, both of which are several notches higher than the city’s GO ratings of BBB-minus by Fitch and BBB-plus by S&P.


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