CHICAGO – The Illinois Finance Authority isn't quite ready to sell a proposed $115 million state moral-obligation backed financing to speed up overdue payments for essential goods and services.
IFA officials said the deal is still in the planning stages, but they weren't ready to seek board approval Thursday as originally planned.
Executive Director Christopher Meister told board members the financing was not "ripe" for approval in pulling the item from the authority board's Thursday meeting agenda.
He later said it was still the authority's "hope" to issue the bonds but that the agency was also "examining" alternatives.
"We are in an extraordinary situation and it calls for extraordinary solutions and those solutions are complicated and complex," Meister said of the delay in seeking approval for the deal that was proposed to help tackle some overdue state bills. "We are working to develop solutions within the limits of our statutory authority."
The state remains mired in a fiscal 2015 budget impasse that has driven its unpaid bill backlog up to $7 billion.
The withdrawn resolution called for an issuance of Illinois Finance Authority taxable revenue bonds supported by the moral obligation of the state to be used for public purpose projects allowed under IFA statutes.
The board did approve emergency procurements hiring Katten Muchin Rosenman LLP as bond counsel for the deal and Mayer Brown LLP as authority counsel. The board also reappointed Meister to a one-year term.
"I'm very pleased to have the support of the governor and the entire board," he said.
The IFA board in November chose Citi to serve as senior manager or placement agent. The deal wouldn't make much of a dent in the backlog but the goal is to target services facing major threats by the lack of state payments.
The board last month approved freeing up $12 million from its balance to support the effort with a portion going to cover upfront issuance costs and fund debt service reserves if needed. A portion of the $12 million allocation will also go to allow for more immediate action to help local governments and vendors who can't wait for the bond issue.
Meister reported that the agency has liquidated investments freeing up about $5.8 million of the $12 million and made its first loan of $250,000 to cover a janitorial contract at the state office building in downtown Chicago.
The authority also originally intended to tap a portion of the $12 million to provide no-interest loans to local entities awaiting funds that cover their 911 emergency dispatch services. The passage and signing by Gov. Bruce Rauner of legislation authorizing $3 billion in targeted spending eliminates the need because it allows for the distribution of 911 surcharge funds.
The board has limited time to get the deal done as it must close on the transaction within 90 days under emergency procurement rules. The IFA launched the competitive underwriting selection process in October. Acacia Financial Group and Sycamore Advisors are advising the IFA on the transaction.
The size of the transaction is limited to $115 million because the IFA is capped by its statutes to $150 million in moral obligation debt and it has $35 million outstanding.
The financing is the result of a request from the Republican governor's office for state agencies to examine how they can assist in managing through the budget impasse.
"The Governor's Office of Management and Budget has been kept apprised of the proposed transaction," Rauner spokeswoman Catherine Kelly said in an email Thursday. "The governor appreciates the willingness of the Illinois Finance Authority to support state vendors during the budget impasse. He will review the terms of transaction when they are finalized."
Rauner's approval is needed to attach the moral obligation pledge.
House Speaker Michael Madigan, D-Chicago, in recent comments has criticized the plan to borrow for operations because he says the state is "awash" in debt.
