Chicago inviting buy side to town in September

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Chicago Mayor Lori Lightfoot and her finance team will make their case for the buy side to stick with the city at an annual investors conference set for Friday, September 20.

Lightfoot’s chief financial officer, Jennie Huang Bennett, announced the date Monday and a “save the date” notice was being distributed to the buy side and other municipal market participants.

The annual gathering, launched by former Mayor Rahm Emanuel’s finance team after he took office in 2011, is typically well attended by bankers and advisors as well as investors.

Additional details on the schedule and location are still in the works, but Bennett said the city’s sister agencies, which include the Chicago Transit Authority, Chicago Public Schools, and Chicago Park District, would participate. Lightfoot will also address investors.

The city will have plenty to present. The 2018 comprehensive annual financial report was recently published and the city will release its annual financial analysis laying out the scope of 2020 budgetary strains and a three-year forecast this summer.

"While Chicago's financial challenges loom large for next year and beyond, Mayor Lightfoot's administration is working to address them head-on by developing a sustainable road map to address our liabilities and put our government on track for building stronger, safer communities and economic growth for our city's future," Bennett said.

Lightfoot, a first-time officeholder who took the city's reins May 20, is also expected to have released her plans to address the city’s budget and pensions woes ahead of the conference based on her recent comments. The next year’s budget is typically introduced in October.

Bennett had no update on budget solutions or timing Monday. “It’s a very large gap and so we are still working through the options to address it,” Bennett said, who also said it's too early to rule out or in any options.

The city is eyeing various management efficiencies in an effort to rein in spending before turning to new or higher taxes and fees, but Lightfoot has warned that new revenue will clearly be needed.

The city also likely will conduct tours at the conference. Past tours have included the Chicago Riverwalk, the Jardine water plant on Lake Michigan, and O’Hare International Airport.

Investors have been clamoring for fiscal updates.

“Mayor Lightfoot’s career has centered on the justice system, and while various criminal and enforcement matters are very important to quality of life issues, she does not have a background in the finance and budgets that most concern investors,” said Howard Cure, director of municipal bond research at Evercore Wealth Management. “Therefore, it is important to understand her philosophy toward tackling these concerns and meeting with her various cabinet appointments that will be in charge of implementing her vision as she strives for budgetary stability.

“I think the investment community gained a certain level of confidence in the fiscal management of Mayor Emanuel as he tried to address the city’s operating deficits and long term liabilities, especially pension issues, while successfully attracting businesses to Chicago and expanding the tax base,” said Cure, who has made the annual trek.

The administration used last year’s early August conference to unveil a $10 billion pension obligation bond proposal. It appeared on the fast track before stalling and Lightfoot views the proposal negatively.

The prior administration put the 2020 operating gap at $600 million to $700 million to cover rising debt, pension, and personnel expenses. The structural deficit last year was projected at $250 million.

The city’s CAFR published earlier this month disclosed the net pension liability tab had risen by $2 billion in 2018 to $30 billion but on the positive side the city’s ending balance had risen to $332 million from $288 million.

The city’s GO bonds are rated at BBB-minus by Fitch Ratings, A by Kroll Bond Rating Agency, junk-level Ba1 by Moody’s Investors Service, and BBB-plus by S&P Global Ratings. All assign a stable outlook.

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Buy side Budgets Public pensions Lori Lightfoot City of Chicago, IL Chicago Transit Authority O'Hare Airport Board of Education of the City of Chicago Illinois