Monday, August 20, 2012
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[August 20, 2012]  The Logan County Finance Committee had a special meeting on Aug. 14 in order to meet with a representative from First Midstate Inc. The board is looking into taking out bonds in order to pay for upcoming major court cases.

Those present at the meeting included Chuck Ruben, chairman; Dave Hepler; Bob Farmer; Jan Schumacher; Terry Carlton; and Sally Litterly. The representative from First Midstate was David Pistorius.

Logan County previously worked with First Midstate in 2005 in order to pay for the development of the Sysco building. That bond is still outstanding.

Pistorius began his presentation by stating that he would be working with Chapman and Cutler LLP, financial attorneys from Chicago.

"Really, there's not a lot of options available to you (the county)," said Pistorius, who presented the board with some basic information concerning First Midstate business practices. Part of this information was the process involved in working with bonds.

Should the county do a bond issue, it would have to work with an underwriter (such as First Midstate) to find buyers for the bonds. The county would also have to work with attorneys to ensure legality. Should there be no buyers found, the county will not be charged for services.

"The biggest buyers of bonds are banking institutions," said Pistorius. As a result, First Midstate often attempts to sell bonds to local banks. The banks receive a tax write-off for buying bonds. Banks will also make bonds available to customers in a secondary marketplace.

Pistorius explained the two types of bonds available to the county:

  • The first type is a general obligation bond. These bonds have a tax levy and a maximum limit equal to 5.75 percent of their assessed value. The board would have to go to a referendum in order to issue this type of bond. The board does not have the time for this type of bond, as it is too late to add it to the next election.

  • The second type is an alternate revenue bond. This bond has no tax levy, and the board would have to pledge current revenues to pay the money back. The revenue stream used to pay the bond back could be any source other than new property taxes. The board would also have to prove as part of a feasibility report that they have an extra 25 percent beyond the borrowed value. Finally, if the bond is issued, the county would have to abate the tax every year until it is paid off.

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Due to time constraints, the board would have to do an alternate revenue bond. Pistorius elaborated on the three steps in such a bond.

  • The first step is to adopt an ordinance of intent. The ordinance has to circulate in a newspaper, and a 30-day petition period begins. If 7.5 percent of registered voters sign a petition, the process can be stopped until the next referendum. The authority to issue bonds lasts for three years if it is not stopped.

  • The second step is to conduct a public hearing. A notice has to be in circulation at least a week before the hearing.

  • The final step is to adopt a bond ordinance. Bonds are sold a week to 10 days before the ordinance is adopted. Funds are received around two weeks after the adoption.

It was also mentioned that the board could attempt to combine this bond with one for a capital project, such as any sort of building repair, in order to get a cheaper interest rate. However, there are no pressing capital projects at this time.

After Pistorius' explanation of those options and what the bond could be used for, a motion was passed to have Pistorius come to the full board meeting on Sept. 13 to explain the options again. First Midstate is a family-owned business out of Bloomington and has been in operation for 60 years. The business specializes in municipal bonds. Pistorius also mentioned that First Midstate often works with schools and has worked with around half of the schools in the state.


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