The Chicago Public Schools district took out a massive $725 million loan Wednesday at a higher interest rate than a scheduled bond issuance they canceled last week.
This week, the district borrowed $150 million less than was planned for the January 27 deal, but will pay an 8.5 percent interest rate on the bonds as opposed to the original 7.75 rate offered to those buying the tax-exempt bonds last week.
Analysts say the additional costs are associated with decisions made by CPS in borrowing the money as well as changes in the political wrangling around the school district. While, the Emanuel administration blames the higher interest rate to the "Rauner premium," experts say it is a "direct consequence of having pulled the deal last [week] and the governor threatening to take over CPS and force it into bankruptcy," Matt Fabian, a partner at Municipal Market Analytics, told the Chicago Sun-Times.
Fabian went on to say that the $150 million difference in what was originally going to be borrowed and what was will need to be addressed in some way.
"They're going to have to borrow the money from somewhere else, get a loan from the city, get whomever they owe money to restructure the payments or, ultimately, raise property taxes," Fabian told the newspaper.
"Borrowing money was never a decision that we took lightly and though some wanted our efforts to fail, CPS needed to move forward in order to keep our doors open so we could educate our children," Ron DeNard, CPS's senior vice president for finance, said via statement.
According to DeNard, the bond sale will hold the district over until the end of the fiscal year in June.
Meanwhile, members of the city council's Progressive Reform Caucus released their concerns about the ongoing fiscal crisis facing the CPS system and the possibility of $100 million in budget cuts, which was announced by CPS CEO Forrest Claypool earlier this week:
"Years of CPS' reckless financial decisions have resulted in terrible consequences for students, educators and the taxpayers of Chicago," said Ald. Susan Sadlowski Garza (10), a long-time CTU member. "Chicago's inability to balance the checkbook could now cost countless Chicago children their education. We implore the Emanuel administration to delay these cuts while bargaining continues."
"There is no question that the impact of these budget cuts will be particularly devastating for thousands of CPS families who have already been affected in recent years by the historic and unprecedented closing of 50 neighborhood public schools," said Ald. Roderick T. Sawyer (6). "These cuts will have a disproportionate impact of those communities, and the most vulnerable students, and that would be unconscionable."
"CPS and CTU leadership need to get back to the negotiating table immediately and come to a resolution that both financially responsible and is good for kids and teachers," said Ald. John Arena (45). "The path forward requires new revenue solutions and full respect for our educators--not unreasonable cuts that will only harm our young people."