Gov. Bruce Rauner on Friday named the firms that will handle the bulk of the state’s sale $6 billion bond sale to help pay off its staggering bill backlog of nearly $15.5 billion.
The first series of bonds will go out in a $4.5 billion negotiated sale, and the state will competitively bid the remaining $1.5 billion in general obligation bonds, according to a statement from the governor’s office. Both series are expected to hit the market in October and close by mid-November.
Additionally, the state plans to issue an additional $750 million in bonds in December to fund capital projects.
The $6 billion will be used to pay down the backlog and allow the state to lower the 12-percent interest rate on its debt, which costs state taxpayers about $2 million per day in penalties, according to the comptroller’s office.
Among the 24 firms managing the $4.5 billion bond sale are financial giants Barclays Capital, Bank of America Merrill Lynch, Citigroup Global Markets and J.P. Morgan Securities. Scott Harry, director of the governor’s budget office, called the group “highly qualified, experienced [and] diverse.”
Rauner was authorized to sell the bonds as part of the budget agreement reached in July, but didn’t agree to do so until early September after months of pressure from state Comptroller Susana Mendoza, Treasurer Michael Frerichs and various business groups.
The governor, who has blamed the backlog on years of deficit spending, directed staff to initiate a bond issuance to refinance “high-cost debt” by borrowing from banks at a lower interest rate. The bonds must be used to pay for general funds or state employees’ group health insurance costs that racked up before the impasse ended, according to the governor’s office.
“The state has been, in effect, borrowing from local service providers, including nonprofits and small businesses, because it takes months for them to get paid,” Rauner said in a statement.
Spokesmen for the comptroller and Senate Democrats declined to comment on Friday’s announcement, but the bond sale was lauded earlier this month.
“Refinancing our debt at a much lower interest rate — just like any sensible homeowner with a high mortgage rate would do — will provide payment for services rendered to thousands of people across the state and save Illinois taxpayers billions of dollars over the life of the bonds,” Mendoza said in a Sept. 7 statement.
Michael Reever, acting president of the Chicagoland Chamber of Commerce, applauded the sale as “a fiscally responsible first step toward a stronger Illinois.”