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.
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
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
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
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.