Chicago’s ‘social bond’ program lets residents invest in neighborhood improvements

The city of Chicago is conducting an experiment in the financial markets. It is giving everyday Chicagoans a chance to invest in and earn money from neighborhood improvements.

It’s a program that sounds tailor-made for die-hard city boosters. No longer do you have to just lobby for or cheer on municipal efforts to rehab dumpy buildings, increase supportive housing or bring something productive to vacant lots. Now you can earn a return from presumably good works, maybe in your neighborhood.

If you wish to put out real cash, you’ll have to decide by Wednesday to get first crack at the program. And there are caveats, enough to raise questions about whether this populist approach to public finance will draw much of a response.

First, the facts: City Hall calls them “social bonds.” Officials are taking the bonds to market this week. On offer will be $97.7 million in nontaxable municipal bonds, “munis,” plus just under $60 million in taxable bonds. Maturities will range from 2026 to 2039. The interest they pay will be determined by the demand; the more the better for the city.

Nine financial firms will manage the bond offering and ensure it gets out to a wide audience. In most cases, investment banks and large firms snatch these to resell to clients. In this case, the city has arranged the offer to go first to individual investors, with dibs to Chicago residents. Bond denominations can be as little as $1,000, not the usual $5,000. Interest is paid twice a year.

On the program’s website is a list of 43 banks or brokerage firms set up to take orders from account holders. Prospective buyers without accounts at any of those firms can call Fidelity Investments, which was hired to distribute orders with Citigroup, said Jack Brofman, deputy chief financial officer for the city. Orders have to be made by Wednesday. The institutions move in on…

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