News - Bill's Blog

Is the city of Chicago a AAA credit, all of a sudden?

December 6, 2017

The city of Chicago’s website has a section to view Mayor Rahm Emanuel’s press releases.  Emanuel’s office has sent out about 60 news releases since November 1, including the likes of “Statement from Mayor Emanuel on NBA Draft Lottery Move to Chicago,” and “Mayor Emanuel and City Officials Celebrate Wendell Phillips Academy Winning the State Football Championship.”

On Nov. 2, 2017, Fran Spielman wrote an article in the Chicago Sun-Times with the headline “Emanuel’s $3 billion sales tax bonds get AAA rating.”  The article began with a more-or-less celebratory tone: “Two Wall Street rating agencies on Thursday gave their highest rating to Mayor Rahm Emanuel’s plan to isolate sales tax revenue in a special fund and use it to refinance $3 billion in city debt,” noting that “The high rating paves the way for dramatically reduced borrowing costs.”

She also reported that “In a press release, Emanuel called the high ratings ‘a direct result of our hard work to address the city’s many legacy financial liabilities.'”

Questions arise about the foundations for this assertion. The high credit rating (which may not be warranted) is unique to the structure of these special bonds, which are not representative of the city’s credit quality more generally. These new bonds will get first dibs on a dedicated revenue stream, which may actually undermine the credit quality of the city for other obligations.  

Curiously, however, when reviewing the city’s site for its press releases, you can’t find a press release about the AAA ratings when they were issued.

Other news outlets also reported on this development, relying on a statement the city delivered to the press.  

Apparently, the city of Chicago issues press releases, and it also issues Press Releases.

Some press releases are more equal than others.

These bonds are expected to be issued later this week.


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