Chicago Council Committee Advances $3.5 Billion of O'Hare Bonds

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CHICAGO – A Chicago City Council committee signed off Monday on up to $3.5 billion of O'Hare International Airport borrowing in a vote that was delayed last week after the bonds got tangled up in questions over Aviation Department hiring and contract practices.

The bonds advanced in a voice vote to the full city council for consideration at its Wednesday meeting. Two members recorded no votes and three abstained. The council on Wednesday will also take up Mayor Rahm Emanuel's proposed water/sewer tax to rescue the city's troubled municipal employees pension fund. That proposal cleared Finance late last week.

The three financings approved Monday include the refunding of up to $1.5 billion of general airport revenue bonds in a deal led by Bank of America Merrill Lynch and up to $1.5 billion of new money GARBs for a new runway and other projects in a deal led by Morgan Stanley.

The third would offer up to $500 million of new money and refunding passenger facility-backed bonds in a deal led by Loop Capital Markets. New money would finance a terminal overhaul.

The GARB refunding is expected later this quarter and the other two in the fourth quarter.

The Finance Committee delved into the three bond deals at a committee Friday with the city's chief financial officer Carole Brown fielding questions primarily over the racial and ethnic makeup of overall staff at investment banks and law firms participating in the transactions.

Council members have long scrutinized the level of minority- and women-owned firms on bond teams, but over the last several years questions have extended to the overall diversity of both the professionals assigned to work on city deals as well as the firm's overall staff. Lead members of teams are required to submit those figures in their economic disclosure statements filed with the city so aldermen now come to the committee armed with the information.

Friday's debate then shifted to questions raised by the council's Black Caucus over the diversity among Aviation Department staff and the amount of airport contracts that go to minority-owned firms. Members were set to meet with Aviation Commissioner Ginger Evans that afternoon but because she was present at the committee meeting she was called to take questions on a report she recently submitted to caucus members.

"The numbers are appalling," said Alderman Pat Dowell.

Evans met with the caucus after the Friday committee hearing, said Aviation spokesman Owen Kilmer.

Black caucus members joined Friday with members of the Progressive Caucus in voting 14-11 to defer a vote on the ordinances. The progressives had raised questions over some of the numbers in documents that on the bond deals and they sought answers before a vote.

The successful move to temporarily delay a vote reflects council members' recent willingness to flex their political muscle. They've come under greater scrutiny for votes affecting city finances and police-related lawsuits and want to shed the past perception that they rubber-stamp administration proposals.

"The mayor has got to understand -- he has to stop rushing things through and this sends a message -- get your issues in order and the ones we've been pushing…..hopefully they get the message," said Alderman Scott Waguespack, a member of the Progressive caucus.

While Chicago has paid punishing spread penalties on its recent general obligation sales as its ratings deteriorated over its pension ills, enterprise-backed bonds such as O'Hare's debt have fared better, with investors demanding far leaner penalties.

Fitch Ratings in May upgraded O'Hare's $6.4 billion of senior lien general airport revenue bonds rating to A from A-minus. About $600 million of passenger facility charge revenue bonds were affirmed at A. The outlook on both is stable. O'Hare's senior-lien bonds are rated A2 by Moody's, A by S&P Global Services and A-plus by the Kroll Bond Rating Agency. The PFCs carry the same Moody's and S&P ratings and are not rated by Kroll.

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