City of Lincoln approves bond request for St. Clara’s Manor
Part 2: Aldermen discuss issuance of Senior Service Industrial bond for St. Clara’s

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[August 18, 2016]  LINCOLN - At the August 9th Committee of the Whole meeting of the Lincoln City Council, the council began discussions on a request from St. Clara’s Manor to issue a Senior Service Industrial Bond for the construction of a new nursing home facility on the city’s west side. This new facility would replace the current St. Clara’s Manor located on Fifth Street in Lincoln.

At the August 1st meeting, aldermen had heard from Wanda Lee Rohlfs who issued questions and concerns about the bond issuance. On that night, the topic at hand was to vote on a waiver of conflict of interest for city attorney Blinn Bates, who also represents St. Clara’s.

On the 9th, Rohlfs returned to the council to ask questions during the public participation segment at the opening of the evening.

Rohlfs said she still had a number of unanswered questions about the bond issuance. Her first question was, would there be a revenue agreement between the city and St. Clara’s?

City Administrator Clay Johnson answered saying that St. Clara’s had representation in the chamber, and that would be part of a later discussion.

Rohlfs then asked if the city and St. Clara’s were required to follow state statutes regarding the issuance of the industrial bond. And if so, were they complying with those statutes? Johnson said St. Clara’s had attorney’s working on the application, and a law firm representing the specific issuance of the bond. He was confident that all statutes that applied to the issuance, including state statutes when applicable, were being addressed.

Rohlfs was skeptical. She said the issuance of an industrial bond according to state statute did not allow for the issuance of the bond to a service industry such as a nursing home. She said the bond also had to be issued with consideration to the “unemployment, underemployment, and those returning from the military (seeking employment) and to increase employment in the community.” She wanted to know if that was indeed being considered and what would the actual impact be?

She returned to a topic from the week prior, the “limited obligation” clause. Again she said that didn’t mean ‘no obligation,’ so she wanted to know what the obligation of the city would be.

Mayor Marty Neitzel said the city was not obligated to pay the bonds at all, that St. Clara’s would do that. She added this was not a tax revenue bond, so the residents of Lincoln would not, could not, be taxed for the payment of the bond.

Rohlfs said there is a difference between “no obligation,” “some obligation,” and “limited obligation,” and she wants to know who is responsible for the limited obligation, is it the city?

When the item came up on the agenda for the night, Steve Aughenbaugh of the State Bank of Lincoln, and attorney Samuel Witsman of Hart, Southworth and Witsman in Springfield were present to address the matter. Witsman was there as the attorney for the bond issue.

Witsman came forward to address the questions posed by Rohlfs and any questions coming from the aldermen. He began by saying that the law firm has reviewed all the statutes that apply including State, Federal, and the statutes of the Illinois Municipal League. The bond application complies with all of them.

He went on to say that his firm has handled a lot of bonds and is well experienced in meeting all the laws and statutes that relate to them.

Witsman said he personally had also worked with the city of Lincoln on these same types of bonds with at least two other companies or organizations; Lincoln Christian College (in 2001, with re-issuance in 2002) and Central Illinois Service Access of Pekin (in 2007, for the construction of a building in Lincoln).

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In reference to Rohlfs questions about the limited obligation, he said this was the terminology to distinguish this bond from a General Obligation Bond, and is a term specifically used in the bond industry.

He explained that the terminology ‘General Obligation’ means that the city has the right to pass the liability to its residents through taxation. The ‘Limited Obligation’ means the city does not have the right to tax its residents for the payment of the bond. He went on to explain, as Johnson had in weeks prior that the bond is a pass through with the city’s name on it. The repayment agreement will be between the State Bank of Lincoln and St. Clara’s, and the city will not be asked to get involved in any way.

Regarding the question about employment, Witsman said he did not have exact figures in front of him, but the St. Clara project was going to be a $22 million from ground up construction project, and that it would indeed impact the labor force. He said it was his guess that the long term employment of staff at the facility would also be impacted.

He said he was satisfied that the bond issuance was in complete compliance with all the statutes he had named earlier.

He also addressed the council about the State Bank of Lincoln’s involvement in the bond issuance. He explained that the SBL would be partnering with a sister bank in Bloomington; Heartland Bank and Trust Company. He said those two lending institutions would be responsible for monitoring the loan or bond agreement, and assuring the collection of payments from St. Clara’s. He said if there should be difficulty in collecting the payments, the two lending institutions would deal directly with St. Clara’s, and would not ask the city to get involved.

Aughenbaugh also addressed the council, explaining that the bank in Bloomington would be the first signatory on the loan or bond because there were tax advantages to signing the bond with that bank as opposed to the SBL. However, the SBL would have half of the obligation. St. Clara’s would issue its payments to Heartland, and Heartland in turn would issue a follow-up payment to SBL for its share of the note.

Tracy Welch asked for clarification of the $9.4 million, saying he understood that the city did not want to exceed $10 million in bonds.

Johnson said that was correct. The city will issue a General Obligation bond at the end of this calendar year, for about one-half million dollars. To keep the city under the $10 million mark, the bond for St. Clara’s for 2016 will be $9.4 million. Johnson added that the $10 million stipulation rolls over at the beginning of the new calendar year, so beginning January 1, 2017, the city can issue up to $10 million in bonds again.

At the conclusion of this Aug. 9th council meeting, there was no further discussion on the topic.

[Nila Smith]

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