Aurora, Illinois contemplates issuing $58M in bonds to generate funds for Penn Casino

Aurora, Illinois contemplates issuing $58M in bonds to generate funds for Penn Casino

Aurora, a city in the Chicago metropolitan area of Illinois, is contemplating the issuance of $58 million in municipal bonds to secure funding for Penn Entertainment's upcoming Hollywood Casino. The regional gambling-friendly project, which has been valued at approximately $360 million, commenced construction around a couple of months ago, with its realization tied to Illinois lawmakers' approval for riverboat casinos, including Hollywood Aurora, to move from water to dry land, thanks to a state policy endorsed in 2019.

At a recently-held meeting, the Aurora City Council's Finance Committee approved a parameters ordinance, outlining the allocation of proceeds from the potential sale of bonds.

Pending approval by the full council on 13th of February this year, the city aims to sell the bonds by the end of the subsequent month. Aurora has a strong "AA" credit rating from S&P Global Ratings, the second-highest grade, with a "stable" outlook. Moody's Investors Service has rated certain city debts at "Aa3," affirming its favorable financing position compared to other Illinois casino towns.

The sale of bonds becomes imperative as Aurora had initially fronted Penn $50 million to jump-start the casino project, with the gaming company committed to repaying the sum through property tax payments. The anticipated repayment period spans more than twenty years, depending on the bonds' maturity date.

To facilitate the progress of the envisioned casino, the city intends to keep the maturity date on the bonds as short as possible, because longer-dated bonds will pose risk of increased interest rates. This strategic approach is expected to help maintain lower yields, making the financial arrangement more cost-effective for investors.

Commenting on the topic, Aurora's Chief Management Officer Chris Minick said the city will likely pay around $94 million over the bond issuance's life, contingent on market conditions. Remarkably, the city retains the option to call the bonds and settle the debt early 8-10 years after the sale. In spite of the financial commitment, the investment is deemed sensible as Hollywood Aurora’s anticipated contribution to the city's revenue streams will extend beyond property tax payments.

As of the first ten months of last year, the gambling-friendly property ranked as the fourth-highest grossing in the state, underscoring the crucial role that it plays in bolstering Aurora's income and sales tax revenues. The issuance of bonds emerges as a strategic financial maneuver, aligning with Aurora’s vision to harness the economic potential of the Hollywood Casino project and contribute to the city's long-term fiscal health.

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