For 1st Time in 17 Years, Chicago To Sell Bonds for School Facilities
The Chicago school district this week will begin selling bonds that will pay for the first phase of an $806 million program to renovate and build schools.
The $350 million bond sale marks the first time in 17 years that the district has been on a solid enough footing to raise money in the financial markets. In 1979, the system went bankrupt and its credit rating plummeted, making bond sales impossible.
But the finances of the nation's third-largest school system have improved markedly since last summer, under the direction of a board of trustees appointed by Mayor Richard M. Daley.
The state law that gave the mayor control of the cash-strapped district also removed some of the constraints it had operated under. Numerous funding sources were collapsed into two block grants, for example, and the method for financing teachers' pensions was changed.
The 413,000-student district's new managers then crafted a plan to balance its budget for four years and persuaded private credit-rating agencies to upgrade their assessments of the Chicago schools.
Fitch Investors Service, Moody's Investors Service, and Standard & Poors Corp. last month all gave the public schools investment-grade credit ratings that made the bond issue possible.
"This was an eight-month process--to get ahold of the finances, pass a balanced budget, show a four-year balanced financial plan, and work and work and work with rating agencies to make them believe that this was for real," Gery Chico, the president of the school board, said in an interview.
The first projects are under way to add classrooms to overcrowded schools.
"We have done a double-hurdle jump," Mr. Chico said. "We have overcome 17 years of terrible financial history and actually begun our construction."
Over the next four to five years, the board plans to sell more bonds to pay for an additional 1,500 new classrooms and other renovations.
The project is expected to renovate 34 percent of all school buildings. It includes the construction of two new schools so that the system can meet a goal of having no school at more than 85 percent of capacity, Mr. Chico said.
In December, the school system sold $45 million worth of certificates called "equipment notes" to raise money to purchase textbooks, computer hardware and software, and an integrated financial database and to establish a computer network and universal database access at each school.