Chicago Tribune

July 13, 2010

By Kathy Bergen, Tribune Reporter

 

While Illinois continues its biggest borrowing spree in recent years, it is paying a steep premium for loans because of its failure to significantly address its financial crisis, observers say.

In peddling another $900 million in Build America capital projects bonds on Wednesday, Illinois could face interest costs of about $9 million a year more than if the state were in better financial shape. The extra costs would total about $225 million over the life of the bonds.

 

John Sinsheimer, the state's director of capital markets, said there is no question Illinois is paying more to borrow than states with better credit ratings. But net borrowing costs to the state remain "very attractive," he said, because interest rates remain at historically low levels and because the federal government will pay 35 percent of the state's interest costs on Build America bonds, the taxable bonds the state is using to fund its capital program.

"It still makes sense to strategically borrow," Sinsheimer said.

The state has not had a capital program for a decade, he said, "so there are a lot of roads, bridges, schools and infrastructure that need improvement. Equally important, we want to put people to work, and every $1 billion in Build America bonds adds 20,000 to 25,000 direct new jobs to the Illinois economy."

 

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