Chicago plans to issue $875 million of second lien water revenue bonds next month in a deal with a possible tender component, according to acting CFO Steven Mahr.
The deal comes as Chicago is looking to expand its water footprint, Department of Water Management Commissioner Randy Conner told the finance committee meeting Monday.
"We're trying to become a more regional water supplier at this point," he said. "The underground aquifers are starting to dry up in other parts of the state."
The city is planning to price the Series 2026 bonds in May, the finance team said in a message Wednesday.
The $661 million Series 2026A new money bonds would fund DWM capital needs through August 2027.
That includes facility projects at both purification plants and seven out of 12 pumping stations, as well as water meter replacements, 20 miles of water main installation, and the replacement of about 12,000 lead service lines with copper service lines.
The $164 million Series 2026B refunding bonds would refinance some Series 2000, Series 2004 and Series 2016A-1 bonds.
The refinancing would not extend final maturities or increase the average life of the bonds, Mahr told the finance committee.
The $50 million Series 2026C refunding is a potential tender that depends on the favorability of interest rates, Mahr said. The tender would target some Series 2017 and Series 2017-2 bonds.
The city's finance team said it is planning to release an invitation to tender "imminently."
The administration of Mayor Brandon Johnson projects the deal will generate $13.3 million in savings, if the tender is completed, and $9 million without the tender.
Mesirow is the senior manager on the deal. Co-bond counsel are Miller Canfield and Holley & Pearson-Farrar. The co-financial advisors are RSI and PRAG.
The city's water bonds are rated Baa1 by Moody's Ratings, A-plus by S&P Global Ratings and Fitch Ratings and AA by KBRA. The outlooks are stable.
The bonds, which have a final maturity in 2066, will be structured to fit within annual projected 2.5% consumer price index rate increases, according to the administration's presentation.
Some aldermen advocated caution.
"What also concerns me about this … is that what we learned not too long ago, by the Department of Management and Budget, is that we continuously find open ends of credit that nobody seems to know about," said Ald. Raymond Lopez, asking if there was "no expiration date" to the bonding authority the council would be granting.
Mahr said the bonding authority would be for a little over $1 billion and carries no expiration date.
"We've talked a lot about the (general obligation) bond issuances and … there's still over a billion dollars of bond authorization that remains untapped," Ald. Nicole Lee said. "And it is a big concern for all of us in this environment."
The city's last water revenue bond sale was $576.4 million in 2023, according to Mahr.
Mahr said the finance team wouldn't rule out another bond issue next year.
"We're working through what an issuance in 2027 might look like," he said. "We might have a bond issue next year, but it's a little too early to say."
The bond received a "do pass" recommendation from the finance committee, with Lopez voting no, and was approved at Wednesday's City Council meeting.
Also at Wednesday's City Council meeting, Lee and Ald. Scott Waguespack introduced a resolution calling for a hearing on the efficiencies detailed in the
The alders also called for administration officials — including Mahr, Comptroller Mike Belsky and Budget Director Annette Guzman — to testify before the City Council.
Mahr plans to testify, the finance team said.
