Chicago seeking financial advisors

BY SourceMedia | MUNICIPAL | 11/29/23 01:22 PM EST By Caitlin Devitt

Chicago is seeking a fresh pool of financial advisors ahead of a series of bond deals next year.

It is the first comprehensive request for proposals related to the city's bonds released under Mayor Brandon Johnson, who took office in May.

An RFP seeking underwriters is also likely but no timing has yet been set, said CFO Jill Jaworski in an interview.

The FA request comes as the financial advisory sector has contracted over the years, Jaworski said.

"That's an area that's experienced a lot of change and contraction," said Jaworski, who, prior to joining the Johnson administration, was a Chicago-based managing director at the top-ranked financial advisory firm PFM Financial Advisors LLC., where she worked directly as an advisor on Chicago's deals and financial policies.

The muni underwriting business is also undergoing change, as illustrated by the November decision by UBS Financial Services to cut its entire public finance team. UBS served most recently as senior manager on the city's Sales Tax Securitization Corporation credit, a finalist for the Bond Buyer's 2023 Deal of the Year.

"The FAs is where we've seen the most change, and when we sat down and looked at our list, we thought it was time for a refresh," she said. "We haven't determined a time to refresh our underwriters pool," she said. The current pool has "many good underwriting firms to choose from," she said, including "a lot of firms who served as senior manager and a lot who are qualified to serve as senior manager that haven't had the opportunity yet."

It's been "quite a number of years since an RFP was done for either FAs or underwriters," Jaworski added.

Interested FA firms have until Dec. 13 to respond to the request for proposals.

The city expects to hire multiple firms and to announce the selections by Dec. 20.

The RFP also is seeking advisors with respect to the city's tax research and consulting services, which will, among other things, be asked to evaluate the "city's financial landscape and develop tailored strategies for enhancing revenue streams and formulating multi-year revenue generation plans," according to the RFP. Firms will also be asked to benchmark the city's revenue performance against "comparable municipalities or established benchmarks to gauge its relative standing in revenue generation."

The selection process comes as Chicago expects to come to market four times next year, depending on market conditions, Jaworski said.

First up, pending City Council approval, will be a wastewater refunding that could price the first quarter of 2024, with the size and timing dependent on the market, she said.

The city also is eying a refunding of water revenue bonds and an issuance of O'Hare airport bonds that would include new money and refunding.

A deal to refinance the city's general obligation and Sales Tax Securitization Corporation bonds to generate $89 million of savings for the 2024 budget is expected to price in the fourth quarter of next year.

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.