The Chicago Park District, which owns more than 8,100 acres of green space, plans to sell $163 million of tax-exempt debt as soon as Aug. 15 in the first general-obligation bond sale from an issuer in the city since its rating was cut last month.
Moody’s Investors Service on July 17 cut Chicago’s rating three levels to A3 from Aa3. A week later, the park district had its rank dropped two levels to A1 from Aa2, with Moody’s citing the district’s ties to the city and its debt and pension obligations. A1 is the fifth-highest grade.
Chicago’s downgrade occurred the day before Detroit filed the biggest U.S. municipal bankruptcy, causing investors to draw comparisons between the two localities. Chicago trailed only Detroit in the rate of population decline from 2000 to 2010 among the 20 largest U.S. cities. The Illinois city, third-most-populous in the nation, also faces an annual pension obligation that would jump from $467 million in 2014 to $1.2 billion a year later if lawmakers don’t restructure the system.
“Chicago’s pension deficit is undoubtedly a cause for concern,” Citigroup Inc. municipal strategists including George Friedlander wrote in a report last week. “However, we believe there are some bright spots on the horizon,” such as its sizable tax base and flexibility to raise taxes.
The district’s bonds are backed by its unlimited and limited taxing powers. About $50 million will finance building and improving parks. The remaining $113 million will refund outstanding securities, according to offering documents.
The district, established in 1934, has 580 parks. Its properties also include Soldier Field, home to the National Football League’s Bears, and Lincoln Park Zoological Gardens, though they are privately managed.
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