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* Tribune…
Chicago Public Schools’ latest long-term borrowing deal will buy the district a bit of financial breathing room through 2019 but comes at an immense cost to future generations.
By the time the $500 million loan is paid off, children now entering kindergarten will be in their mid-30s and the school district will have spent $850 million in interest costs alone — making the total expense of the bond issue a whopping $1.35 billion.
And only a small fraction of the money from the long-term bonds issued in July will be used for school construction or classroom improvements, which budget experts say should be the primary use for long-term debt. CPS is using the biggest chunk of the loan to reimburse itself for failed bond market deals the district previously covered with cash. Another large portion will be used to shave a few hundred million dollars off old debts — even as it extends those debts as much as 25 years.
In addition, the deal commits an enormous sum of state aid to bondholders through 2046, even as state funding remains at the center of an ongoing battle in Springfield. If state aid is ever not enough to cover bond payments, CPS has pledged to turn to property taxes to pay for the loan.
posted by Rich Miller
Monday, Jul 31, 17 @ 9:03 am
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Previous Post: A good plan to stop the override, but no plan yet to pass a bill
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It’s bad not to pay your bills in a timely fashion and then have to borrow and pay huge interest amounts. We’ve had cheap tax rates and skated. Bills have come due.
Comment by Anonymous Monday, Jul 31, 17 @ 9:05 am
Daley did this. Rahm hasn’t fixed it. You can argue about the role of state education funding, bloated contracts, labor costs, charter schools, school closings, etc. All may have a role. But this is a massive failure of governance by Chicago’s mayors.
Comment by Keyrock Monday, Jul 31, 17 @ 9:09 am
Mayors Own. Especially when the Chicago Mayors appoint the members of the CPS School Board, instead of having CPS board members elected like every other school board in Illinois.
Comment by Ravenswood Right Winger Monday, Jul 31, 17 @ 9:20 am
Kick the can politics is the hallmark of politicians with a apex priority of self-promotion, and slithering aversion to responsibility and accountability.
Comment by Anonymous Monday, Jul 31, 17 @ 9:21 am
While I agree Daley I and II bear the greatest responsibility for this and Rahm hasn’t done near enough to fix it. The timing of this CPS expose strikes me as a little too convenient for Rauner. Once again the Trib is playing politics. What solutions do they put forward?
Comment by Jimbo2 Monday, Jul 31, 17 @ 9:23 am
===Once again the Trib is playing politics===
Remove your hyperpartisan tinfoil hat. These are reporters, not editorial writers. You print it when you get it.
Comment by Rich Miller Monday, Jul 31, 17 @ 9:26 am
=While I agree Daley I and II bear the greatest responsibility for this=
Daley I ????? I seem to recall he passed in 1976.
Comment by Upstate Monday, Jul 31, 17 @ 9:26 am
Is there another school district in this state with so much wealth yet so many students in poverty?
Comment by City Zen Monday, Jul 31, 17 @ 9:27 am
I don’t say the content is not correct. Just that the timing is suspect. Maybe I missed information that indicates that this is a breaking story or evidence that the reporters just submitted the story.
Comment by Jimbo2 Monday, Jul 31, 17 @ 9:29 am
Time for Chicago homeowners to be taxed as high as those outside of Cook County, don’t you think?
Comment by Anonymous Monday, Jul 31, 17 @ 9:43 am
@- Anonymous - Monday, Jul 31, 17 @ 9:43 am:
===Time for Chicago homeowners to be taxed as high as those outside of Cook County, don’t you think?===
The Cook County assessments on residential property should be equalized with the rest of the state. People in Chicago think their taxes are high, but Chicago and Cook County taxes are low compared to the collar counties.
Comment by DuPage Monday, Jul 31, 17 @ 10:22 am
Actually Jimbo2, this is the second article Mr. Perez has done on CPS borrowing, its timing is consistent with CPS releasing the underlying terms of its additional debt just about a week and a half ago. Juan Perez is an excellent reporter and is totally aware of rhe educational consequences of the imposition of greater austerity on CPS schools. I only wish his article would have touched on what is called the combined tax burden on Chicago home and business owners that is growling exponentially to keep CPS afloat. CPS will have to do some pretty awfully things in the near future.
Comment by Rod Monday, Jul 31, 17 @ 10:27 am
Where is Squeezy the Python when the costs of our bonded debt actually come to light? Does Squeezy only care about pensions?
Comment by Whatever Monday, Jul 31, 17 @ 10:50 am
===Does Squeezy only care about pensions?===
His full name was Squeezy the Pension Python. So, yes.
Comment by Rich Miller Monday, Jul 31, 17 @ 10:57 am
In summary:
1) $500 million dollar bond issue
2) $850 million dollars in interest over term of the bond issue.
3) $1.350 billion dollar total.
This is truly a terrible deal. This looks like a two year deal to bridge the 2018 election to get JB Pritzker as governor at a middling cost to the taxpayers of ‘only’ $850 million dollars.
And then most of the $500 mil raised is actually going to be used to unwind previous bad financial deals that CPS entered into?
The clown show that is CPS appears to be taking lessons in creative financing from the government of Venezuela.
Comment by Anon Downstate Monday, Jul 31, 17 @ 11:09 am
===Time for Chicago homeowners to be taxed as high as those outside of Cook County===
It would be good if the Chicago property tax rate just equaled the average rate for the rest of Cook County.
Comment by Hit or Miss Monday, Jul 31, 17 @ 1:37 pm
The real story here is toxic predatory debt instruments - swaps, CAB (Capital Appreciation Bonds), etc. - the mayors were allowed to essentially take out the municipal version of pay day loans.
The banks are the banks - they’ll do anything we let them do.
Why do we allow our mayors to do this?
These instruments and anything resembling them should be banned from municipal finance.
Comment by TinyDancer(FKASue) Monday, Jul 31, 17 @ 2:48 pm
I’m still trying to figure out how this makes sense to anyone, in any way. The debt load we are taking on - mind you through a bond - leaves no lasting vestiges of improvement. No new schools. No long-term improvements. Just a shell game that hides financial mismanagement. If I tried to do that at my job, I wouldn’t only be fired, but they’d probably try to find a way to place me in prison.
Comment by Just Wondering Monday, Jul 31, 17 @ 5:31 pm
== Daley is to blame.==
The legislature and governor agreed to the pension holiday Daley asked for, so the State is complicit in the funding crisis.
Comment by anon2 Monday, Jul 31, 17 @ 5:59 pm