CHICAGO (Reuters) - The Chicago Public Schools (CPS) will refund up to $600 million of outstanding bonds after its governing board, seeking to save money for the cash-strapped district, signed off on the plan on Wednesday.
Unlimited-tax general obligation bonds that could be refinanced by the junk-rated district for interest-rate savings were sold in 2006, 2007, 2008, 2009 and 2013, according to a resolution passed by the Chicago Board of Education.
Michael Passman, a CPS spokesman, said the refinancing will not extend maturities on the existing bonds and that the structure and timing for the debt issuance was being finalized.
“As a result of education funding reform, CPS is on stronger financial footing and the district is able to reduce borrowing costs so that more resources are available to directly support schools,” Passman said in an email, referring to last year’s enactment of a new Illinois funding formula for primary and secondary public schools.
Escalating pension payments have led to junk credit ratings, drained reserves and debt dependency for CPS, the nation’s third-largest public school system.
CPS last sold debt in the U.S. municipal market in November with a $1 billion new and refunding bond sale.
Those bonds were marketed with the message that CPS gets a $450 million funding boost to repair its finances under the new state formula.
However, a fiscal 2019 Illinois budget proposed by Republican Governor Bruce Rauner in February would strip $228 million in state money earmarked for CPS pensions.
Reporting by Karen Pierog; Editing by Matthew Lewis