A cash-strapped Chicago Public Schools seeks to issue almost $1 billion in new bonds, the district announced in a public notice Tuesday.
That’s as the Chicago Teachers Union, angry that CPS’ projections for a balanced budget count on union concessions, offers strike training this weekend.
The latest borrowing for the broke school system will be up to $945 million “for the purpose of financing the rehabilitation, renovation, construction and acquisition of school and administrative buildings and equipment, site improvements and other real and personal property, funding of contract obligations, the purchase of school grounds for the construction of or additions to school buildings and costs of issuance and other costs and reserves related to the foregoing.”
The district will hold a public hearing at 8:30 a.m. on Aug. 24 at its headquarters, 42 W. Madison, just before its 10:30 a.m. meeting, when the Board of Education will vote on authorizing the borrowing.
CEO Forrest Claypool told reporters Tuesday that the authorization would support capital improvements over multiple years and that a $45 million capital levy recently passed by the City Council would primarily pay the bonds back.
“We are confident that investors will find that acceptable,” he said, noting that the board would have to approve actual bond sales when they’re presented in the future.
A spokeswoman wouldn’t specify whether the district intended to go to the open market or into a “private placement” arrangement.
Just last month, CPS borrowed $150 million in a “private placement” with JP Morgan — rather than on the open market — to pay for “critically needed” construction and maintenance work. Several investment websites indicate that investors often expect higher rates of return on such arrangements. In return, they benefit from the typically shorter time it takes for them to be completed.
At 7.25 percent, their interest rates were high — but better than a round of borrowing last winter, when CPS sold $725 million in bonds on the open market at yields of 8.5 percent for investors. Those bonds won’t be paid off until 2044.
Both those rates are significantly higher than they were for comparably structured CPS bond deals from just last spring, when CPS sold hundreds of millions of dollars in bonds at yields of around 5.5 percent, records show.
A $300 million budget deficit, possible teachers’ strike and crushing pension payments have made investing in CPS’ bonds a riskier proposition. Three Wall Street ratings agencies have rated the school system’s debt at “junk” status.
Teachers haven’t set a strike date yet, but they have indicated they won’t go another entire year without replacing their contract, which expired June 30, 2015.
On Tuesday, they were invited to a “Chicago Troublemakers School” on Saturday that includes instruction on on “Planning and Winning Strikes.”
“Our bully mayor, billionaire governor, and greedy corporations in Illinois are pushing a coordinated agenda,” the invitation read. “They want to slash wages, abolish pensions, outsource jobs, and gut public services. We’ll need unity to fight back and win.”
“We have to be prepared — either way,” union spokeswoman Stephanie Gadlin said.
Contributing: Chris Fusco