Chicago reported a $219 million surplus at the end of its last fiscal year, despite a decrease in governmental activities' net position and a drop in investments tied to moves to boost liquidity, according to the city's 2025 Annual Comprehensive Financial Report, released on Tuesday.

The city's net deficit rose by $1.26 billion, to $30.5 billion at the close of the fiscal year, which tracks the calendar year, due primarily to growth in long-term liabilities.

Total assets climbed $1.32 billion following a $2.21 billion surge in cash and cash equivalents tied to bond proceeds for future capital projects, and increased liquidity in governmental funds, according to the ACFR.

Other factors contributing to the climb in assets included a $1.05 billion increase in capital assets that were not depreciated as Chicago made infrastructure investments to address maintenance costs, and a $665.9 million uptick in property tax receivables due to collections timing, with a greater share of levied property taxes outstanding at year's end.

"Our administration has shown that fiscal stewardship and investing in Chicagoans go hand in hand," Mayor Brandon Johnson said in a statement. "Thoughtful budgeting, accurate revenue forecasting, and careful stewardship of taxpayer dollars helped produce a significant surplus while strengthening the city's financial foundation."

Chicago's general obligation bonds and notes outstanding grew by $409.3 million from GO issuances, Sales Tax Securitization Corp. bonds, and the city's use of its three lines of credit, with a $551.8 million balance outstanding at the end of 2025.

The city refunded about $1.8 billion of bonds in 2025, including $462 million of GOs, a city spokesperson said by email.

After refunding $309 million of water revenue bonds in May, the city expects further refunding opportunities for other credits in the second half of 2026, the spokesperson said.

The Johnson administration noted in a statement that expenditures ticked up by 0.6%, below the 2.7% annual rate of inflation, while budgetary revenues rose 7.5% year-over-year.

From 2024 to 2025, the aggregate funded ratio of the city's four pension funds rose to 28.15% from 25.63% on a fair-value basis, driven partly by strong investment performance, the administration said.

"Publishing the city's ACFR on time reflects this administration's commitment to transparency, accountability, and sound financial management," Comptroller Michael Belsky said in a statement. "This report provides a clear picture of Chicago's finances and demonstrates meaningful progress across the city's major funds."

Offsetting the increase in total assets was a $2.05 billion drop in investments as the city moved toward cash and cash-equivalent instruments in its portfolio to enhance liquidity and maintain financial flexibility.

Compounding that was a $152.9 million decrease in cash and investments with escrow agents due to reduced bond refunding activity year-over-year, and a $98.3 million decline in lease receivable as related agreements continue to amortize, the ACFR said.

Higher proceeds from debt issuances, line of credit activity and recognition of lease and subscription financing drove a $382.5 million year-over-year increase in total revenues in the governmental fund.

The general fund balance dropped by $312.1 million year-over-year, closing out 2025 with a total balance of $75.6 million, $53.6 million of that assigned. The decrease stemmed from the use of the city's prior year assigned fund balance for the supplemental pension payment of $271.9 million, and from expenditures exceeding revenues, according to the ACFR.

Due to operational efficiencies, general fund expenditures on a budgetary basis were $199.2 million below budgeted expenditures.

The Johnson administration is actively seeking efficiencies across multiple departments, including fleet, real estate, organizational management, land sales, procurement, benefits, special events cost recovery, Office of Public Safety Administration medical unit costs, and technology, a city spokesperson said.

The administration expects that when fully implemented, those efficiencies will yield significant short- and long-term cost savings and increased revenue, the spokesperson said.

The city's governmental activities net position reached a deficit of $34.28 billion due to higher statutory pension contributions; increased spending on homeless services and youth employment; and steeper pension expenses resulting from legislative changes and less favorable actual demographic and economic trends than projected by actuarial valuations, the ACFR said.

Chicago also saw a decline in grant revenues, the Johnson administration said, due to "lower reimbursable grant activity, timing of grantor reimbursements, and certain grantor review requirements prior to reimbursement; and lower property tax revenues due to timing differences in property tax collections."

The city spokesperson said the decline reflects the ongoing expiration of one-time COVID-19 recovery grants.

The total fund deficit of the bond, note redemption and interest fund grew $72.8 million year-over-year, hitting a total of $5.11 billion. That growth was due mainly to debt service and refunding payments exceeding revenues. But the increase was less than in 2024 because scheduled principal retirements, interest costs and refunding decreased year-over-year.

The STSC debt service fund has a total fund balance of $5.38 billion, increasing by $48.2 million in 2025 due to the issuance of the STSC Series 2025A bonds, Series 2025B bonds and second lien STSC Series 2025A bonds.

The city has not yet made the second half of its 2026 supplemental pension payment, the city spokesperson said.

At fiscal year's end, Chicago had $5.35 billion in GO bonds, $551.8 million in its three GO lines of credit and $8.7 million in other general obligations outstanding.

The city's GO debt is rated Baa3 with a stable outlook by Moody's Ratings, BBB with a negative outlook by S&P Global Ratings and A-minus with a negative outlook by Fitch Ratings and KBRA.

An analyst and an alderman contacted by The Bond Buyer did not respond to requests for comment by press time.