CPS, the nation’s third-largest public school system, is struggling with pension payments that will jump to about $720 million this fiscal year from $676 million in fiscal 2016, as well as drained reserves and debt dependency – factors that have pushed its GO credit ratings deep into the junk category and led investors to demand fat yields for its debt.
Illinois Governor Bruce Rauner last week vetoed a bill to give CPS a one-time $215 million state payment to help cover pension costs.
Ratings for the new bonds, backed by a $45 million a year property tax levy approved by the Chicago City Council in 2015, were not available. Because that tax revenue can only be used to fund capital projects and not operations, CPS is hoping bondholders will consider the debt a safer bet than the district’s GO bonds.
A CPS spokeswoman could not immediately be reached for comment.