In a significant financial move, Illinois is set to issue $725 million in Build Illinois bonds through a competitive bidding process on Tuesday. The funds raised will support various capital projects across the state, enhancing infrastructure, economic development, education, and environmental protection. This issuance includes three series of bonds—Series 2025A, 2025B, and 2025C—with maturities extending up to 2045. The bonds are secured by a portion of the state's sales tax revenue, ensuring robust financial backing. Ratings agencies have provided strong ratings, reflecting confidence in the state’s ability to manage these obligations despite economic uncertainties.
The issuance of these bonds comes as part of the broader Build Illinois program, which has an authorized funding limit of $11.36 billion. Of this amount, nearly $6.78 billion has already been issued, leaving $4.58 billion available for future projects. The current issuance aims to bolster ongoing initiatives while maintaining fiscal responsibility. The bonds will be backed by a 5% share of the state's unified sales tax, with no debt service reserve fund for the junior bonds. However, they are secured by amounts deposited in specific debt service and general reserve funds, providing additional safeguards.
The Series 2025A bonds, maturing in 2035, are not subject to optional redemption, while Series 2025B and C, maturing between 2036 and 2045, include a typical municipal 10-year call provision. Fitch Ratings, Kroll Bond Rating Agency (KBRA), and S&P Global Ratings have assigned strong ratings to the bonds, citing high debt service coverage and the resilience of pledged revenues. Fitch expects state sales tax deposits to rise with inflation, supporting the bond's financial strength. KBRA highlights the historically strong and increasing pledged sales tax revenues, noting that the state share of sales tax receipts has grown faster than debt service requirements, resulting in rising debt service coverage since 2018.
S&P Global Ratings also emphasizes the extraordinary MADS coverage, which has exceeded 40x over the past three fiscal years, providing considerable downside protection even under a slow growth outlook. The stable outlook on these bonds primarily reflects the state's stable credit profile, with S&P noting that the state has historically borrowed modestly against its sales tax receipts due to their critical role in the operating budget. Despite economic uncertainties, including potential impacts from federal actions, the state's broad and diverse economic base offers substantial support for these bonds.
The upcoming sale marks another step in Illinois' commitment to sustainable financing for essential public projects. With a competitive bidding process scheduled for Tuesday, the state aims to secure favorable terms while continuing to invest in its future. The proceeds will be instrumental in advancing key initiatives, ensuring that Illinois remains resilient and well-prepared for the challenges ahead. Prospective bidders must submit their bids through i-Deal’s PARITY competitive bidding system, with deadlines varying for each series. This strategic issuance underscores the state's dedication to responsible financial management and long-term development.
