Chicago Set to Hold Its First-Ever Investor Conference Next Month

CHICAGO — Chicago will hold its first-ever investor conference next month as new Mayor Rahm Emanuel and his chief financial officer, Lois Scott, seek to bolster the city’s strained fiscal image with the buyers of its debt.

The City of Chicago Investors Conference 2011 is scheduled for Thursday, Oct. 20, from 11:30 a.m. to 5 p.m. Central Time with a reception to follow at the Union League Club downtown.

The conference is free to investors while there is a $100 fee for other participants, such as bankers.

The city will host visits before the program to the Jardine Water Treatment Plant, O’Hare International Airport, and Walter Payton College Preparatory High School, and also conduct a Chicago Transit Authority rail tour.

Questions about the conference should be e-mailed to cic@cityofchicago.org.

“Lois Scott is spearheading an effort to foster and continue an open and positive dialogue with the investor community so they are informed about the city’s development and future financing plans,” a city spokeswoman said of the motives behind the event.

Additional details of the program were not yet available, but sources said Emanuel was expected to make a presentation along with Scott.

Representatives of the city’s sister agencies with their own bonding authority — such as the Chicago Park District, the CTA, and Chicago Public Schools — were also expected to attend the conference along with key cabinet members whose departments oversee enterprise systems.

The conference leadership team includes Emanuel, Scott, CTA president Forrest Claypool and CFO Karen Walker, Aviation Commissioner Rosemarie Andolino, Water Commissioner Tom Powers, Chicago Public Schools chief executive Jean-Claude Brizard, CPS chief operating officer Tim Cawley, and Chicago Park District CFO Steve Hughes.

“I think it’s all positive,” Thomas Spalding, senior investment officer at Chicago-based Nuveen Investments, said of the conference. “We are big holders of Chicago’s revenue bonds and it’s great to see the people behind the payment of the bonds get out from behind their desks. Hopefully we will hear that they not only want to maintain their ratings but enhance them.”

The major outreach comes as officials plan two fall issues, the first under the new city regime. They include the sale of up to $500 million of new-money general obligation bonds to fund capital projects and other expenses and a refunding of up to $250 million of sales tax revenue bonds.

CPS and the CTA, both of which are grappling with budget deficits, also have deals in the works, while the Park District will enter the market next week.

The city paid a premium to borrow last year due to the headline risks associated with its fiscal woes -—including a large budget deficit, mounting pension obligations and rating downgrades — in combination with those of the state.

The so-called “Illinois penalty” added a premium last year that ranged from 25 basis points on better credits to as much as 100 basis points on lower credits or those with more exposure to the state’s budget and liquidity crisis. The penalty has narrowed since the state’s adoption of an income tax hike earlier this year.

Chicago’s former chief financial officer, Gene Saffold, conducted additional investor outreach last fall but still saw a penalty even on water and sewer deals backed solely by system revenues. Chicago ranked second after Illinois among Midwestern issuers last year, issuing $3.4 billion in 26 transactions, according to Thomson Reuters.

The conference will follow the release of Emanuel’s first budget on Oct. 12. The mayor inherited an estimated $635.7 million gap in the next spending plan when he took office in May and he recently laid out the city’s financial woes in stark form for the public, investors and analysts in a recent fiscal analysis.

Former Mayor Richard Daley and the City Council did take some structurally sound steps such as establishing the city’s first reserve, cutting back on expenses, trimming the workforce, and raising taxes and fees.

But a fiscal reckoning is at hand after Daley over the two years relied heavily on non-recurring revenues such as debt restructuring and dipped deeply into reserves to erase red ink, citing concerns that deep spending cuts and layoffs would hurt the city’s economic recovery.

Chicago faced a $655 million deficit in the $6.15 billion budget for fiscal 2011.

Economic pressures, growing costs, and the use of one-shot measures last year drove a round of downgrades of the city’s nearly $7 billion of general obligation debt.

Fitch Ratings rates the GOs AA-minus and Standard & Poor’s rates them A-plus, and Moody’s Investors Service rates them Aa3. All three agencies have stable outlooks on the credit.

Emanuel has vowed to avoid one-shots and to not raise property taxes. Most analysts believe it will take a multi-year plan to stabilize city finances.

Chicago’s long-term debt hit a peak this year at $19.4 billion. The figure includes GO borrowing, sales tax and motor-fuel tax revenue bonding, tax-increment financing debt, water and sewer bonds, and airport borrowing.

The city’s four pension funds have unfunded liabilities of $15 billion because payments to the systems are set by state statute and fall short of the actuarially required contribution level. In addition, Chicago is facing a state-mandated $550 million payment increase in 2015. A total of $624 million remains in the various reserves.

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