Chicago officials will welcome the buy-side back for an in-person event Aug. 11 during which its COVID-19 pandemic fiscal recovery efforts will take center stage as the city looks to court investors ahead of billions of planned borrowing this year.
The annual conference gives Mayor Lori Lightfoot’s administration an opportunity to update the buy-side on healthier fiscal metrics from the 2021 annual financial report published last week while offering a look at how the city is faring so far this year, and the picture for 2023.
The gathering also gives investors the chance to pose questions on those top-of-mind subjects ahead of a
The event provides the city an opportunity to highlight other issues front and center with investors, such as efforts on environmental, social, and governance (the city's
The city distributed a “save the date” notice Wednesday with details still to come. Lightfoot’s predecessor, Rahm Emanuel, launched the conference in 2011. Last year, the city reverted to a virtual, online event that was held in May amid the ongoing pandemic.
“What I’m hoping to hear is the impact of the COVID-19 pandemic on the city’s current economy and what they expect going forward and are they really being careful about using the federal money for one-time expenses and not creating a recurring expense,” said Howard Cure, director of municipal bond research at Evercore Wealth Management LLC. “This is not a normal bounce back from a recessionary economy. This is changing how people work and interact with the city.”
The $1.2 billion Chicago Recovery Plan that relies on a mix of federal relief and borrowing doesn’t pose a long-term funding burden on the city, according to Chief Financial Officer Jennie Huang Bennett, but Cure said investors need to more deeply scrutinize those assurances given the likelihood of political pressures to maintain social programs. Lightfoot is seeking a second term next year.
Cure’s long list of questions range from the city’s efforts to combat crime given the harm negative headlines pose on the city’s appeal for residents, tourists, and business. The potential long-term pandemic impacts on the commercial real estate market, especially downtown where a lackluster return to the office could damage property assessments and cut into sales taxes, also worries Cure. “How are they budgeting for that?” Cure said.
Cure is also looking for a tourism update as those numbers impact hotel and other taxes that provide a good indication of the city’s economic health.
Pensions remain the city’s most burdensome weight on its balance sheet. Chicago now has fully phased-in actuarial-based contributions and saw some improvement in funded ratios 2021, but the net pension liability continued to grow — albeit at a slower pace — despite returns that exceeded assumptions.
How stable are they and how able are they to weather a market downturn, Cure asked. The eventual $200 million expected once a permanent casino opens in the coming years will relieve some pressure on the city’s corporate fund as that revenue must go to pension payments, but Cure asked: “How baked into future budgets are the casino revenues because those revenues are susceptible to fluctuations.”
The Chicago City Council in May s
Cure also has questions on how the Chicago Transit Authority is
Gov. J.B. Pritzker last year
Looking back and ahead
The finance team hasn’t yet released formal budget projections for the coming year but Budget Director Susie Park warned of a $305.7 million gap based on preliminary estimates discussed during a fiscal update presented in May at a council committee hearing. That’s down from an $867 million shortfall warned of in last summer’s forecast.
The city wiped out a $700 million gap heading into the 2022 budget with federal aid, growing revenues, and expense savings in the
Bolstered by federal pandemic relief and rebounding revenues, the city closed the books on 2021 with a healthier unassigned fund balance of $318 million, up from $197 million in 2020, while the assigned balance rose to $324 million from $131 million.
“The city experienced a very strong performance in FY2021,” Finance Department spokeswoman Rose Tibayan said in a statement.
The fund balance rose “primarily due to the recovery of revenues that were impacted by the COVID-19 pandemic and decreases in eligible expenditures that were transferred to grant funds received for the COVID-19 response,” the report reads.
Since the start of the pandemic, the city has received more than $3.6 billion of federal relief including $1.9 billion in American Rescue Plan Act funds.
The city’s upward trajectory of its net pension liabilities continued although the increase was down from the more than $1 billion hikes seen over the previous four years.
Net pension liabilities rose to $33.7 billion from $32.96 billion for 2020 due to various assumption changes that are key factors into calculating the unfunded liabilities.
All saw improved funded ratios. The funded ratios for the municipal fund rose to 23.41% from 22.96% last year while the net liability rose to $14.1 billion from $13.7 billion.
The laborers funded ratio rose to 45.92% from 44.42% while the net liability rose shrunk slightly to $1.57 billion from $1.59 billion.
The police funded ratio rose to 23.54% from 22.21% and the net pension liability rose to $12.5 billion from $12.05 billion.
The firefighters funded ratio rose to 20.93% from 18.97% while the unfunded tab shrunk to $5.5 billion from $5.6 billion.
Total contributions jumped this year to $2.28 billion from $1.8 billion in 2021 as all four plans are now receiving an actuarially based payment that puts them on a track to reach a 90% funded ratio between 2055 and 2058. The funds warn that the payments still fall short of a payment based on best actuarially practices.
The city closed out the year with an other post-employment liability, or OPEB, of $2 billion.
The city closed 2021 with $5.9 billion of long-term general obligation debt, $215 million in two GO lines of credit, and $93 million of GO certificates, $4.6 billion of Sales Tax Securitization bonds, $4.9 million of Motor Fuel bonds; $7.7 million of Tax Increment Financing Bonds; and $15.3 billion of Enterprise Fund Bonds and long-term obligations.
“Since 2019, the city has reduced our total long-term governmental debt outstanding by $340 million and debt outstanding across all credits by over $1.3 billion due to active cash management and maturing of principal,” the report notes. Lightfoot took office in 2019.
The city made a small dent in it net position based on governmental activities which shrunk to $29.43 billion from $30.33 billion in 2020.
The city also highlights how it ratings weathered the pandemic storm. The city’s GOs carry a BBB-minus rating from Fitch Ratings, A from Kroll Bond Rating Agency, and BBB-plus from S&P Global Ratings. All — along with Moody’s Investors Service, which rates Chicago at a speculative grade and has not been asked to rate city deals for years — revised the city’s outlook back to stable last year. They had moved the outlook to negative earlier in the pandemic.
