CHICAGO - Chicago Mayor Rahm Emanuel submitted to the City Council ordinances seeking authorization for up to $2 billion of O'Hare International Airport borrowing, $500 million of general obligation refunding debt, and $175 million of wastewater revenue bonds.
The ordinances were introduced Wednesday at the council's last meeting before its summer hiatus, which extends to mid-to-late September. The council's finance committee must sign off on the deals before a council vote.
The O'Hare general airport revenue bond authorization would include $1.7 billion of refunding and $300 million of new money for capital projects. Bankers said the city was breaking the borrowing into two transactions, one with current refunding paper and one with advance refunding GARBs.
The wastewater financing could help the city further resolve its liquidity risks tied to downgrades imposed by Moody's Investors Service in May.
The agency junked the city's GO credit and dropped its water and wastewater revenue bonds to lower investment-grade ratings. The actions triggered default events that allowed banks to demand repayment of $2.2 billion of floating-rate paper, swaps, and credit line debt.
The city has resolved the threat to its corporate fund through recent refundings and swap terminations. The city's remaining liquidity issues involve principal repayment on $332 million of wastewater debt and $25 million of swap termination costs in addition to $110 million of potential swap terminations on water debt.
The GO refunding would mark the city's latest round of borrowing for budget relief and to ease the liquidity woes triggered by the downgrades. The city has paid steep interest rate penalties between 250 and nearly 300 basis points to the Municipal Market Data benchmark on its recent tax-exempt financings and nearly 500 basis points over Treasuries on its taxable tranche as its ratings sunk amid pension funding ills.
The city's has an $8 billion capital program to reconfigure O'Hare's runways.
Fitch Ratings rates the airport's $6.5 billion of senior lien general airport revenue bonds A-minus and $664 million of passenger facility charge revenue bonds A, with stable outlooks.
O'Hare reclaimed the title of world's busiest airport in 2014, a decade after ceding the status to Atlanta's Hartsfield-Jackson Memorial Airport. The status is based on the number of flights which totaled 881,933, down .2% from 2013, compared to Atlanta's 868,359 flights.
O'Hare's GARB credit profile including leverage and coverage levels are weaker than those of large single-A level hub airports, but Fitch said mitigating factors include the airport's strong local market and its strategic hub location.
Standard & Poor's rates the airport's GARBs and stand-alone PFCs A-minus; Moody's Investors Service rates the GARBs and PFCs A2. The city's general obligation credit deterioration has not spilled over to the airport "due to the very limited connection between the finances of the two entities," Moody's has previously said.
Emanuel on Wednesday also introduced an ordinance to establish rules governing future asset privatization deals. The restrictions are aimed at curbing public and council concerns fueled by the city's much maligned 2009, $1.15 billion 75-year privatization of its parking meter system.
Mayor Richard Daley pushed through the lease with little council review, the management company botched implementation of the transition, and Daley then drained most of the proceeds to balance his last two budgets before retiring in 2011.
The ordinance, which is supported by a key union and the Better Government Association, puts into law a framework Emanuel said was used to review a proposed lease of Midway Airport. Emanuel sought to resurrect Daley's plans to lease the airport but he canceled the effort when the city received only one qualified bid.
"This ordinance would insert accountability and transparency into the process to ensure that any potential privatization in the future would be appropriately evaluated, publicly debated, and, if accepted, would be subject to ongoing oversight," Emanuel said in a statement.
The ordinance would apply to asset lease valued at a minimum of $400 million with a 20-year term and the privatization of services over $3 million. Construction, engineering and demolition contracts would be exempt.
It would put in place a detailed public review of the cost effectiveness, impact, and value of any proposed deal. A 90-day review would be required before a council vote, an independent advisor would be asked to review the plan, and bargaining units could make a counter offer on services. Once completed, annual performance audits would be required.
Also at the meeting, the council approved expanding the voting membership of the Chicago Infrastructure Trust board to seven from five members and approved Emanuel's new appointments, including his pick of city treasurer Kurt Summers to serve as board chairman. The board will meet next week and is expected to approve Emanuel's pick of first assistant corporation counsel Leslie Darling to serve as the new executive director.
