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 Tuesday evening, Mayor Keith Snyder disclosed that the
application for the TIF funding has gone through the TIF committee
and that committee is recommending the city enter into an agreement
with Lanterman.
However, the city does not have $2 million available, so in order to
work with Lanterman on the project the city will need to secure
those funds from an outside source. The most viable way to do this
would be to issue alternative revenue bonds.
TIF or tax increment funding is a program that allows the city to
invest in improvement and development projects and reclaim their
investment through increased property tax revenues.
Tuesday evening Snyder said Lanterman’s original estimate of $2
million had actually been raised to $2.3 million. The additional
$300,000 he said would be used to do the sidewalk renovations that
would allow that block of Kickapoo Street to matchup with the city’s
street scape plan. Snyder said because it is a city sidewalk, the
city will eventually reimburse Lanterman for that portion of his
construction costs.
Mayor Snyder and city treasurer Chuck Conzo have been investigating
what the city can do in issuing new bonds. The city officials told
the council they are recommending the city go with the firm First
Mid-State for this project. They are also recommending they issue
what are called tax exempt bonds.
Snyder explained there are tax exempt and taxable bonds available.
The taxable bonds are less complicated to maintain, but he feels the
city should still pursue the tax exempt bonds.
He said in doing so, the city would have to document that they are
not receiving any income from the business owner in exchange for the
TIF money and the city would not be able to prevent Lanterman from
contesting any future tax assessments.
Snyder said the tricky part of this situation is in that Lanterman
needs the money now, but there will be no collection of increased
property taxes for the city until 2016. That causes a problem in
that the bonds would have annual payments due starting in the first
12 months, and the city would have no means of making the payment.
The solution to this, he said was to seek to have the bond payments
re-amortized so that the first two years payments would be rolled
back into the bond, and spread across the remaining 18 years.
Snyder noted the change in property tax on the physical location of
the new business will be a very significant amount. The Logan County
Assessor’s office has estimated the first year, the property tax on
the new theater will be $152,597 but that is the amount the city
will not receive until 2016.
Snyder said if the bond payments are rolled back, by year three the
city will be able to break even on the revenue versus bond payment.
He went on to say that he had put together a spreadsheet with annual
increases in property tax of two percent. With those annual
increases, the city will start building reserve cash in the TIF
program within six to seven years.
Snyder explained that with the approval of the council to issue the
bonds, there will be a 30-day clock that will prevent the bonds from
being issued for that period of time. This has to be done so the
public can present petitions if they wish to contest the bond
issuance, and even push that the bonds be approved by referendum
vote. Because this bond issuance will not have any effect on
taxpayers, it is not expected that there will be any concerns.
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Conzo recommends paying off EPA loan with bonds
In a related matter, Conzo talked with alderman about issuing
alternative revenue bonds to pay off the city’s loan with the
Environmental Protection Agency.
Conzo first brought this proposal to the council in January of
2013. On the day they discussed it, the difference in the
interest rates between the EPA note and the bonds would have
saved the city about $100,000. This week Conzo explained that
before the council could make a decision, the rates changed on
the bonds, and the savings were depleted.
In 2001 the city began working on a modification to the city
waste treatment plant that would bring it up to EPA standards in
the state of Illinois. The modification wasn't necessarily one
the city did by choice, but rather something they were forced to
do by the EPA.
At that time, the EPA was offering low-interest loans to all
municipalities that completed their upgrades. The city applied
for such a loan and received approval in 2002 for a $9.8 million
loan at an interest rate of 2.557 percent. The annual payment to
the EPA is $642,000.
This week, Conzo said interest rates have fallen again, and once
again the city could save about $100,000 on the life of the
note. He said if the city goes with a 10 year bond, they will
pay that off just as quickly as the EPA note, but the interest
rate would be only 2.13 percent.
Given that interest rate, the annual payments on the bond would
be $630,000, about $12,000 less than what the city is paying the
EPA.
Conzo said he would recommend the council move forward with this
suggestion. He had in 2013 worked with Bernardi Securities of
LaSalle on this, and recommended them again.
As with the TIF bonds, once the council approves going forward,
the 30-day clock will start.
What happens to the interest rates in that period of time may
affect how the city eventually does move forward on this. A
decrease in rates obviously would be desirable. If however, the
rates go up and the savings diminish once again, the city may
not issue the bonds.
Tuesday night, the council by nod of head indicated they wanted
to vote on this, and offer Conzo the opportunity to save them
about $100,000.
During discussion Conzo was asked if Bernardi would charge a
fee. Conzo said they would, but compared to what could be saved
in the end it would be insignificant.
The discussion of bond issues came to an end with Tom O’Donohue
saying that both requests should be placed on the Monday voting
agenda.
[By NILA SMITH] |
