Chicago Comes Up Short $75 Million on Muni Bond Deal

Authored by GoldFix 

GFN – CHICAGO: Goldman Sachs was left holding $75 million of a $454 million Chicago sales-tax bond deal after investors demanded higher yields and still failed to fully take the refinancing, a sign that markets are growing uneasy with the city’s widening budget deficit and escalating borrowing plans.

 

The offering, according to Bloomberg sold through the Sales Tax Securitization Corporation, carries a AAA senior-lien rating six notches above Chicago’s A- general obligation grade, yet spreads widened materially versus last year. Senior 2045 bonds priced roughly 85 basis points above AAA benchmarks compared with 66 basis points on a similar deal in 2024, and second-lien 2042 bonds came at a penalty of about 102 basis points, wider than both preliminary talk and prior issuance. According to city officials, the refunding still achieved debt-service savings, but the need to sweeten yields and the $75 million left on Goldman’s balance sheet highlight that even securitized structures are being dragged back toward Chicago’s underlying fiscal concerns.

 

This comes as Mayor Brandon Johnson confronts a nearly $1.2 billion budget gap, a rejected revenue package in the finance committee, and a proposed record $3.8 billion borrowing authorization that includes $2 billion for refinancing and $1.8 billion for new debt covering infrastructure, firefighter back pay, and police-related legal settlements. Ratings agencies have flagged these operational borrowings as poor fiscal practice; S&P downgraded the city earlier this year and shifted both its GO and sales-tax liens to negative outlook, while Fitch maintains a negative view as well.

The Chicago Tribune’s editorial board noted the city already holds $2.4 billion in unused capital bonding authority from prior ordinances, making the administration’s request for an additional $1.3 billion in infrastructure authorization harder to justify at a moment when investors are requiring higher compensation to hold Chicago paper.

 

With widening spreads, unsold bonds, and rising skepticism toward financing day-to-day obligations with debt, the market has delivered a clear warning: the cost of Chicago’s fiscal strategy is moving higher.

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