CHICAGO, March 3 Illinois and its biggest city,
Chicago, will head to the supply-starved U.S. municipal bond
market this month to sell more than $800 million of debt.
The state has set a $402 million competitive sale of taxable
Build Illinois sales tax revenue bonds for March 11, according
to the deal's preliminary official statement.
Chicago will sell $405 million of general obligation bonds
through Wells Fargo Securities next week, a market source
familiar with the deal said.
Sizable deals have been scarce, with issuance by states,
cities, schools and others in the first two months of 2014
totaling just $32.4 billion, down 35 percent from the same
period in 2013. February issuance was the lowest for that month
in 14 years.
Illinois' sale on Feb. 6 of $1 billion of GO bonds drew $5.5
billion in orders as investors scrambled to buy debt.
Unlike Illinois' GO bonds, which carry the lowest ratings
among all 50 states, the Build Illinois bonds, which are secured
by state sales tax revenue, are rated higher, fetching ratings
of AAA and AA-plus for a deal last year. Proceeds from the deal
will continue funding for a state capital improvement program.
The finances of both Illinois and Chicago have been weighed
down by big public pension funding problems.
The muni market was cheered by Illinois' passage in December
of reforms aimed at easing the state's $100 billion unfunded
pension liability. However, the law, which takes effect in June,
is being challenged on state constitutional grounds in four
lawsuits brought by state workers, retirees and unions.
On Monday, the Illinois Supreme Court consolidated all of
the cases in Sangamon County Circuit Court in the state capital
Chicago, meanwhile, faces a $600 million state-mandated jump
in pension payments next year and needs the state legislature to
postpone the increase or pass reforms that would lower the
city's contributions to its retirement systems.
Chicago's large and growing pension liabilities led Moody's
Investors Service last July to drop its rating three notches to
A3, with a negative outlook.
The city's bond sale consists of tax-exempt and taxable new
and refunding bonds.
Illinois' upcoming bond sale precedes Governor Pat Quinn's
fiscal 2015 budget address, which was postponed to March 26 from
Feb. 19. The Democratic governor, who faces re-election this
year, has projected income tax revenue will drop by $1.4 billion
in the upcoming budget due to the partial expiration on Jan. 1
of tax rate hikes enacted in 2011.
A government finance watchdog group on Monday warned that a
tax rate rollback would "dramatically destabilize Illinois'
already weak financial condition."
The Chicago-based Civic Federation said the legislature
should maintain the higher rates for another year, then
gradually cut them, while applying the income tax to retirement