Chicago Park District to issue $37 million of new bonds, pursue tender offer

The Chicago Park District Board of Commissioners on Wednesday unanimously approved ordinances laying the groundwork to issue roughly $26 million of general obligation limited bonds and $11 million of alternate revenue bonds, and to refund up to $145.9 million outstanding of Series 2021A bonds through a tender that would convert the taxable bonds to tax-exempt debt. 

The park district is looking to price the new money bonds in late March or early April, Chief Financial Officer Steve Lux said.

The board will still have to grant final approval to issue the new bonds and sell the refunding bonds in March, but on Wednesday it gave the go-ahead to launch the process on all three fronts.

The $26 million of general obligation bonds will go to buy condemned land or land designated for parks or boulevards, and to build, maintain and improve said parks or boulevards. 

The $11 million of alternate revenue bonds will finance the acquisition, construction and expansion of recreational facilities for people with disabilities. The projects will be scattered across the city, Lux said, and may include amenities such as wheelchair ramps and elevators for people with mobility challenges.

Jefferies will be lead underwriter of the new bonds, with help from Cabrera Capital Markets. Acacia Financial is the deal’s municipal advisor and Cutler is bond counsel.

The new money bond projects are part of the park district’s capital improvement plan for 2021 to 2025. The plan estimates that the park district will issue $159 million in general obligation bonds over that period and $5 million in special recreation assessment bonds. It projects an additional $76.1 million in outside funding.

That money is to go toward land acquisition, park development, new building construction, facility management, park improvements and investments in technology and equipment, according to the plan.

“Over the next few years, investment will be focused on restoration of existing fieldhouses and cultural centers and replacement of park assets reaching [the end of] their useful life,” it states. 

The park district is also gearing up to refund the Series 2021A bonds by means of a tender. With the board’s approval to start the tender process, Lux said, the park district will post a disclosure on the Municipal Securities Rulemaking Board’s EMMA website next week.

“In 2021, when the rates were low, we issued bonds on a taxable basis to refund various bonds that were issued in 2013, 2014 and 2015,” Lux explained, adding that that refunding generated savings of $16 million. 

The park district now has “an opportunity to replace the 2021A bonds that are taxable and convert them to tax-exempt bonds by reaching out to the current holders of the series 2021A and offer to buy them back, which we would do at a discount, using proceeds from bonds that we’d issue simultaneously,” Lux said. 

“Based on other tenders that we’ve done, the participation rate could be anywhere from 10% to 70%,” he added. 

Assuming a 25% participation rate, and based on rates, he said, the park district could generate savings of about $2 million, dependent on market conditions.

Fitch Ratings and S&P Global Ratings both assign AA-minus ratings to the district, and both elevated their rating outlooks to stable in 2022.

Kroll Bond Rating Agency in September affirmed its long-term rating of AA, outlook positive, on the park district’s general obligation bonds.

Moody’s Investors Service withdrew its Ba1 rating on the park district’s general obligation unlimited tax and general obligation limited tax debt in 2021 “for business reasons.” Moody’s had linked the park district rating with the city of Chicago’s. The withdrawal came before Moody’s in 2022 upgraded Chicago to investment grade.