Chicago Public Schools, still unclear on how much state aid the district will receive for the new school year, sold $500 million in long-term general obligation bonds at high interest rates, doubling planned borrowing after buyers lined up.
Some $215 million will restructure existing debt, and the rest will pay for capital projects and reimbursements for payments related to interest rate swaps, district spokeswoman Emily Bittner said. She wouldn’t release further details, saying that “CPS hasn’t finalized its budget, and will detail how the bond proceeds are being used at that time.”
The new bonds, underwritten by J. P. Morgan, add to the $7.5 billion CPS already holds in long-term debt.
In a statement, CPS’ senior vice president Ron DeNard said that the district received $1.1 billion in orders for the bonds, generating $500 million authorized by the school board.
DeNard touted the interest rates as lower than the whopping 8.5 percent CPS paid last year on general obligation bonds, but they’re hardly low. Ranging from 7.25 percent up to 7.65 percent depending on maturity date, they’re at least twice what a typical government would pay on the same deal, according to Municipal Market Data.
The district has depended on expensive short-term borrowing to make a recent payment for teacher pensions and to stockpile enough cash to operate the district until the state, which until last week had no budget, pays its backlog of bills, including hundreds of millions in block grants owed to CPS. But Illinois’ largest district won’t know what its share of state aid is going forward until separate school funding legislation backed by superintendents statewide gets past the governor’s desk, either by his signature or override votes should he follow through with plans to veto it.
Meanwhile, CPS principals still await news of their spending plans as do many charter schools that open well before Labor Day. CPS’ entire operating budget must be approved by the school board before Sept. 1.