Jennie Bennett spent four years as Chicago’s chief financial officer, faced with structurally imbalanced budgets and plummeting revenue during the pandemic. She led the push to build the city’s first casino and her work helped the city make fiscal improvements to shed its one junk credit rating from Moody’s Investors Service last year.
(Bloomberg) — Jennie Bennett spent four years as Chicago’s chief financial officer, faced with structurally imbalanced budgets and plummeting revenue during the pandemic. She led the push to build the city’s first casino and her work helped the city make fiscal improvements to shed its one junk credit rating from Moody’s Investors Service last year.
She hands the keys to the city’s coffers over to Jill Jaworski, a 25-year veteran of municipal finance, after new mayor Brandon Johnson was inaugurated on Monday.
Chicago is on more stable financial footing than where it stood just a few years ago, with the outgoing administration projecting a $698 million surplus in 2022 and 2023 that will go toward chipping away at its massive pension liability until revenue from its first casino starts flowing. The threat of an economic downturn, however, looms for the third-largest US city and millions in costs are adding up to care for an influx of migrants from the US borders.
Bloomberg News spoke with Bennett during her last week as CFO. The following comments have been edited and condensed.
What are the biggest challenges facing Chicago’s next CFO?
Walking the path of fiscal discipline can be very difficult, and can be very difficult layered in with the various financial stakeholders that you need to balance.
Within the mid-year budget forecast, one of the things we talked about are the set of lagging revenues that still continue to lag the pre-pandemic levels and that baseline that we project from. That’s roundly about $192 million of revenues.
They are largely three categories of revenues. There is work-from-home revenue. There is tourism based revenues. There is business activity revenues. To the extent those revenues don’t recover, it effectively represents a nearly $200 million loss in our revenue portfolio, which isn’t insignificant in the context of a $5 billion corporate fund budget.
That’s a challenge that we had started to take up, had we had a second term, we would have spent a lot of time on and that she’ll want to spend time on as she’s considering her financial plan going forward.
One of the things that the mayor did throughout the course of the last year of the term was to increase investments in the downtown area.
So, to the extent that work from home continues to be a permanent part of our work-life balance, we can still capitalize on the downtown area as a vibrant place for people to work, live and play.
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What have been your biggest accomplishments as CFO?
The biggest accomplishments can be encapsulated in the 13 rating upgrades that the city has achieved over the last eight months and three positive outlooks, the first rating upgrades for the city of Chicago in as much as a quarter of a century. With the three positive outlooks we’ve set the city on a path to continued financial improvements. The city should see, based on those positive outlooks, another rating upgrade in 2023 or 2024 as long as it continues on the path of fiscal stability that we started.
What those rating upgrades ultimately mean, is we’ve walked the path of fiscal discipline, toward the financial turnaround that I’ve spent a lot of time talking to folks about. That financial turnaround and fiscal stability ultimately pays for city investments.
One really specific example is the billion-dollar pension ramp that we climbed and the quarter-of-a-billion dollar debt ramp that we climbed due to the end of scoop and toss.
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How was a downgrade avoided in the early months of the pandemic?
At the beginning of the term, before the pandemic actually occurred, one of our rating reports listed about eight different factors that would warrant a downgrade. There wasn’t a very wide array of pathways that we could walk to structural balance that were available to us and then the pandemic hit. During the pandemic, we lost $1.5 billion in revenue between 2020, 2021 and 2022.
They were very difficult circumstances and a number of issuers did get downgraded.
When we started in 2020, before the pandemic, we provided the rating agencies with a three-year financial plan. We said this is our pathway to structural balance in three years, transparency with the rating agencies that hadn’t been done in at least a couple of decades.
Similar to the discussion we had about improvement in pricing with bondholders, we were able to navigate the credit challenges with rating agencies in large part because of the transparency we provided them.
How has selling the city’s bonds changed since you first became CFO?
Number one, we saw tightening of the credit spreads because of the rating upgrades. What I’ve said often in support of fiscal stability and discipline is that that for each rating upgrade that the city receives we will see approximately $100 million in savings for every $1 billion in bonds that we issue. The city issues somewhere between $1 billion to $2 billion a year. Fiscal stability pays for city investments.
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And even more importantly, we are starting to see investors come in on our bonds sales that are normally investors who invest mostly in high grade credits.
We have also changed the way that we market our bonds as well as the way we conduct our pricing that we think maximizes investor participation. Since day one under Mayor Lightfoot’s term, we’ve held transparency as a really important part of building trust with investors and selling the credit story.
We have also as part of our bond sales increased the participation and opportunity for participation for retail investors which was very helpful for the retail offering and pricing for the waste water bonds and the social bonds.
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