Chicago will go to market next week with $517.95 million of taxable and tax-exempt general obligation bonds following a downward outlook revision from Fitch Ratings.
The $272.4 million of Series 2025A, $155.8 million of Series 2025B, $23.57 million of Series 2025C and $53.07 million of Series 2025E bonds are federally tax-exempt. The $13.04 million of Series 2025D bonds are taxable.
Fitch cut the outlook to negative on the city's A-minus issuer default rating and general bond rating May 22, citing "a lack of substantial progress procuring permanent and high impact solutions" to Chicago's structural budget gap.
The deficit, projected at over $1.1 billion for 2026, now makes up 20% of the corporate fund budget, Fitch noted.
"Macroeconomic headwinds and federal policy uncertainty may exacerbate the gap resulting in additional dependence on non-recurring solutions, including higher than expected draws on reserves," the rating agency said. It added that new revenue streams seem unlikely in the near term, as they require action by the state legislature or approval from voters.
The bond issue comes as Chicago is squaring off with the White House on a litany of issues.
In a supplement to the
"The city has conducted a risk assessment of city departments and agencies to determine where impacts may be most concentrated and the potential impacts on the city's financial position," the city said, adding that the assessment identified two potential financial exposures.
One is the possible elimination of grant programs or cuts in grant amounts at the federal or state level. The other is exposure to non-reimbursement or delays in reimbursement for funds the city has already expended.
"The city is actively monitoring its accounts receivable for unusual delays in the standard reimbursement process as a result of federal actions," the city said. "Unusual delays in reimbursement could have a negative impact on the city's cash flow."
In a presentation shared with the press on Tuesday, Mayor Brandon Johnson's office outlined its response to the Trump administration's policies.
Among other things, the slide deck highlighted two active lawsuits the city has filed against the Department of Homeland Security. One is for freezing reimbursements to large cities for the costs of protecting against nuclear or radiological terrorist attacks; another is for freezing reimbursements for the costs of helping newly arrived migrants released into the country by DHS.
The city has filed amicus briefs in five other lawsuits against the Trump administration, and has also joined lawsuits relating to Department of Transportation, National Endowment for the Arts and Head Start funding.
The Trump administration has threatened to further cut Chicago's federal funding over its sanctuary city policies, and the Justice Department is investigating the Johnson administration's hiring practices after the mayor publicly praised his team's diversity.
Chicago said it has launched "a centralized and coordinated response" to those risks and continues to actively monitor the outcome of litigation related to federal policy changes.
Fitch also assigned a negative outlook to AAA-rated senior-lien Sales Tax Securitization Corp., while keeping a stable outlook for the STSC's AA-minus junior-lien bonds.
KBRA rates the Series 2025 GO bonds A-minus with a negative outlook. S&P Global Ratings assigns a rating of BBB with a stable outlook.
KBRA pointed out that Chicago's 2025 budget counts on the Chicago Public Schools to cover a disputed pension payment, which CPS has so far refused to do.
Douglas Kilcommons, managing director in KBRA's public finance ratings group, said a failure by CPS to make the payment "would introduce yet another revenue pressure the city would need to manage," at a time when economically sensitive revenues may not materialize as budgeted.
The rating agency also flagged the federal funding issue.
"To the extent federal funding associated with the provision of certain critical services is materially reduced or eliminated, resulting in increased budget strain and/or diminished financial flexibility, the City's GO rating may be negatively pressured," Kilcommons said.
In the near term, he said, KBRA expects rising fixed costs to pressure the budget and potentially crowd out other corporate fund spending.
S&P highlighted the city's sharp dip in receipts from corporate personal property replacement taxes, the result of a law passed last spring that allowed a larger tax deduction for corporate net operating losses.
Still, Director Scott Nees praised the city's preservation of its advance pension funding policy in the fiscal 2025 budget and said the rating agency expects Chicago's commitment to endure.
"We believe that given the critical status of the city's pension funds — which are collectively only 23% funded — the rating could be pressured if Chicago were to elect to forego the advance payments," he said.
As the Illinois General Assembly nears the end of its session, Nees added that the fate of the proposal to expand the sales tax to services is not a major factor in the city's near-term credit picture.
Chicago's finance team did not respond to questions by press time.
The lead managers on next week's negotiated sale are Loop Capital Markets and BofA Securities. The financial advisors are RSI Group LLC and Public Resources Advisory Group. Co-bond counsel are Chapman and Cutler and Charity & Associates.
Bond proceeds will finance capital improvement program projects, refinance line of credit agreements, fund capitalized interest on the Series 2025 bonds and pay costs of issuance, the city said in an
On the week of June 23, Chicago plans to price $100 million of additional GO bonds — Series 2025F and Series 2025G — to fund housing and economic development projects. That deal is also a negotiated sale.
The city had $4.98 billion of outstanding GO bonds prior to this issuance.
