Featured Municipal Bond Issue, Week of November 26, 2018: The Board of Education of the City of Chicago — $763.3 Million
The Board of Education is issuing $763,3 million Unlimited Tax General Obligation Improvement Bonds, comprised of two series: $450,025,000 Unlimited Tax General Obligation Refunding Bonds (Dedicated Revenues), 2018C Series and $313,280,000 Unlimited Tax General Obligation Bonds (Dedicated Revenues), Series 2018D.
The 2018C bonds will be used to refund the Series 2008C and 2009D Bonds and the 2018D bonds will be used to provide new financing for the Board’s Capital Improvement Plan.
The bonds are being sold by negotiated underwriting during the week of November 26, 2018 by a senior management group led by J.P. Morgan.
The bonds are general obligations of the Board of Education for which its full faith and credit are pledged. Under state law, the bonds are considered Alternate Revenue Bonds and are secured by one or more dedicated revenue pledges and shall be payable from ad valorem (property) taxes to be levied on all the taxable property within the School District without limitation as to rate or amount. In the first instance, state aid revenues for the school district are intended to be used to pay debt service. In the event of a default, a state aid intercept provision is intended to be triggered. The Series 2018D bonds will be secured by Personal Property Replacement Taxes in addition to state aid.
The bonds are expected to be rated by S&P, Fitch and Kroll. Certain maturities of the 2018C bonds are planned to be insured by the AGM insurance company.
The Board of Education of Chicago has a total enrollment of 361,000 students serving a school district population of approximately 2.7 million persons living in the City of Chicago. In recent years, the School District has been struggling with struggling with serious financial challenges, including its retirement fund unfunded pension liability. The District reports that it has experienced recent reserve improvements due, in part, to increases in state student aid support. The city of Chicago’s economy is broad based. At the end of September 2018, the city’s unemployment rate stood at 4.0% vs. the national rate of 3.6% for the same time period.
The preliminary plan calls for the Series 2018C bonds to be scheduled for amortization beginning in 2019 through 2032 and the Series 2018D bonds are to be retired beginning in 2021 through 2046. Both series are expected to be made callable bonds. The Board of Education plans to simultaneously offer a separate 2018 Dedicated Capital Improvement Tax (CIT) bond issue that is not a part of this featured bond commentary.
Interest on the Series 2018C and 2018D bonds are in the opinion of Bond Counsel tax-exempt for federal but not state income tax purposes.
Details on the purposes, tax-status, security, risks as well as other matters pertaining to these bonds can be found in the preliminary official statement after registering on the munios website and searching for Board of Education of the City of Chicago
After registering, visitors can link direct to the official statement for the Board of Education of the city of Chicago General Obligation (Dedicated Revenues) . A roadshow audio presentation by the underwriter and School District officials is available on the MUNIOS website accompanying the official statement.
These facts and numbers are for informational purposes, and should not be considered an official disclosure for potential investors. Investors should consult the official statement. None of the information provided should be construed as a recommendation by MuniNet Guide, MuniNet LLC, Merritt Research Services LLC, or any of their employees. Information and analysis is for informational purposes only.