Logan County Board takes first steps in acquiring courthouse restoration funds

Board members given option to meet virtually during Covid

[April 16, 2020]  On Wednesday, March 25th, the Logan County Board held a special meeting taking action on several timely matters. On the agenda were a couple actions to initiate the acquisition of funds for the Logan County Courthouse restoration. The board also needed to formalize the County Emergency Proclamation Declaration for Covid-19.

File request for sales tax collection with state

During the primary held on March 17th voters approved a half-cent sales tax for up to 20 years. The referendum stated that the revenue would be dedicated to a public facilities fund for the restoration and repairs of the courthouse. The referendum was the third attempt at the measure, which passed by 63% with 3,443 yesses.

The state of Illinois needs a copy of the ordinance establishing the tax before May 1, for the tax to begin being collected on July 1st, 2020. There is about a three-month turnaround period, and then the county could expect the first check in October or November 2020.

The ordinance to impose a retail’s occupation tax (sales tax) for the purpose of restoring and repairing the Logan County Courthouse passed unanimously by the 10 board members present - Dave Blankenship, Emily Davenport, Bob Farmer, Cameron Halpin, David Hepler, Steve Jenness, Chuck Ruben, Bob Sanders, Scott Schaffenacker and Jim Wessbecher. Janet Estill and Annette Welch were absent.

This ordinance requires 15 days display and at the next voting meeting, Tuesday, April 21st, the board can give final approval. Then a copy would be sent to the Illinois Department of Revenue.

Bond Ordinance‘notice of intent’ with a 30-day review

The board next went through a series of complex decision-making steps in the acquisition of General Obligation Bonds. Bond expert David Pistorius of First Midstate, Bloomington, reviewed the processes and procedures, and answered questions.

Pistorius said a copy of the referendum question just as it appeared on the ballot was incorporated into the bond ordinance.

He said there would be several steps yet in the future, including the final bond ordinance when the bonds are ready to be sold, but first would be ‘notice of intent’ to go out for bonds.

The following are some of the details that were discussed as Pistorius explained the ins and outs of the bonding process.
The preferred choice for the county is the use of Alternate Revenue Source Bonds. They offer the lowest interest rates. With these types of bonds the borrower (the county) pledges a revenue source to pay the debt back. The new sales tax is the revenue in this instance.

There needs to be assurance the county would have the funds, so a 25% coverage is required.

1) The coverage can be met by borrowing 25% less than the amount the sales tax that is expected to bring in each year. This reduces the amount that may be borrowed.

2) Another (alternate) revenue stream representing the 25% coverage can be pledged in the case that the sales tax would not be sufficient any given year.
The Corporate Replacement Tax has a sufficient revenue that could be listed as the designated source of coverage, but if the sales tax were to be insufficient, any other revenue source could be decided at that time.

As an automatic process, each year in November the county would levy property taxes, and then do an abatement when the sales tax has covered the bond payment. Property taxes automatically serve as the last choice backup revenue. If in a given year the sales tax fell short of the payment (debt service), the board could determine other revenue to fill in the shortage.

If during the 30-day public viewing of the bond ordinance, a petition in opposition to the recently approved referendum received signatures by seven-and-a half percent of Logan County’s 17,796 registered voters, 1,348 signatures, the county has several choices: put the referendum on the next November ballot for vote again, drop the project, or consider debt certificates.

Debt certificates are a tax exempt installment contract that do not go through a petition period. Debt certificates do not require back-up revenue. Pistorius explained that debt certificates are not as preferred because they do not have a dedicated alternate revenue source, which makes them less appealing to investors and the interest rates would be higher. In an example, debt certificates might cost the county a half-million dollars more in interest over the course of the debt period.

A review of Alternate Revenue Certificates

1) By statute, the revenues that are pledged must have a 25% coverage factor. There needs to be 25% more revenue available than the amount of the bonds taken out. It is a protective feature to citizens that property taxes will not be levied, Pistorius said.

2) Once the 30-day period is over the county has the authority to issue the bonds. That authority is good for three years. Pistorius explained that the three-year time allows greater flexibility and options. By way of example he said, you could publish the order of intent for bonds on the higher side, say $12 million, then only issue for $10 M in bonds, and if there were cost overruns in that three years, there would be $2 M still available to cover those costs.

Pistorius said there were two decisions before the board on the bond issue for the special meeting: decide the amount to publish and would any additional revenue besides the public facility sales tax be committed.

In April or May there would also be a public hearing for the community to ask about the specifics of the project.

Later yet, the final step would be to set the bond ordinance. Bonds are sold a week to 10 days prior to the final bond ordinance at current market values, which would influence the interest rate. This process might take place in May or June. The county could expect the proceeds three weeks after the ordinance is filed.

The new sales tax for the court house is in the same increment as the public safety tax; one-half cent. It would be put into a designated fund for the sole purpose of the courthouse renovation and repairs. The Public Safety Tax has been bringing in $938,000 to $940,000 per year.

However, it was recognized that sales tax revenues could be significantly impacted by Covid-19. Much is unknown about how sales taxes might be impacted at this time and about interest rates while the market is currently turbulent. Pistorius thought that the economy might be more settled by the time the county would be ready to go out for bonds in May or June.

Ruben questioned if it would be ok to get all set up for issuing the bonds and be ready, but if turmoil was still an issue, the bonding could be delayed a little bit. Pistorius agreed.

The Public Safety Sales Tax, which is the same percentage as the new sales tax, has been coming in $940,000.

Pistorius suggested using a safer figure of $935,000. Taking the 25% coverage out would provide $750,000 per year. Any that comes in over the $750,000 from the sales tax could be utilized for courthouse projects or kept in the fund to accumulate and later used to pay down the bonds quicker.

Another option, if the county wants to utilize the full amount of the anticipated sales tax, $935,000 a year, is to pledge another revenue for the 25% coverage.

Various interest rates and bond amounts

Finance Chairman Chuck Ruben confirmed with Pistorius that later, once the proposed bond issuance ordinance is enacted, the county has three months to commit to the bonds. This allows some flexibility to try for the best interest rate.

Pistorius said that prior to covid, the bond market held some of the lowest rates he’d seen in his career. Mid-March he did a bonding at 1.23%, however the market is volatile right now. It is hard to say where interest rates will be when Logan County is ready to go out for bonds. First Midwest would wait for the dust to settle a bit, and he’d make a recommendation on when to act.

When looking at to the debt service (payments), Pistorius prepared two projections based on how much the county would pledge set at three to five percent interest rates. Lower rates may be available when it comes time to bond.

1) The first option using $750,000 pledged from the sales tax, reserving the anticipated remainder for the 25% coverage, the county would receive between an estimated $9.3 M – $11 M in bond amounts.

2) The second option using $935,000 per year with 25% coverage pledged from the Corporate Replacement Tax provides a bond issue between $11.6 M - $13.766 M.

As board members discussed the options, Schaffenacker put forth an amendment seconded by Hepler for the bond amount not to exceed $9.5 million. Hepler recalled that before the election, voters were told the costs would be plus or minus 15% of $7.9 M. Also, the option presented by Pistorius as an option to include the Corporate Replacement Tax as the 25% coverage had not been presented to voters either.

Blankenship commented on the potentially higher construction costs. He said those figures presented to the public had changed and are now said to be $9.5 M and the county needed to be prepared to add another 15% due to construction costs having gone up.

Covid impact was mentioned in regard to construction costs and interest rate increases.

The amendment to not exceed $9.5 M in bonds failed 2 – 8 with Hepler and Schaffenacker voting yes.

The main motion to issue General Obligation Bonds in the form of Alternate Revenue Source to be paid by the newly approved sales tax passed with all present voting yes.

Board members recognized that choosing a higher bond amount now for the intent to issue bonds notice allows opportunity to lower the figure when it is time to pass the final ordinance to issue bonds when interest rates and construction costs are better known.

The notice of intent to issue bonds would be limited to $750,000 debt service for potentially $11 M in bonds.

Summary

- A specific fund would be set up for this special tax to go into that designates that funds can only be used for the courthouse restoration and repairs.

- The sales tax has a limited time of 20 years.

- Annual overages can be used for courthouse related projects or accumulated and later put on early bond pay-off.

Covid-19 Emergency Declaration

All 10 board members present voted yes to approve the Covid-19 Emergency Declaration.

County Board meetings during covid

All Logan County Board committees were canceled for April. Committees will discuss matters during the Board Workshop tonight, Thursday, April 16th. The Regular Board session with voting will take place on Tuesday, April 21st.

To protect the board members and support staff, State's Attorney Bradley Hauge has continued to look into what actions the board and other entities subject to public transparency and services are permitted.

In an update on Ap 15th regarding the Open Meetings Act, Hauge said, “It appears that the Attorney General is backing the Governor and his executive order. The AG is now of the opinion that board members do not need to be physically present, not even a quorum, for all votes to count. It is my opinion that everything that Logan County is doing is appropriate and legal, pursuant to the executive order and the guidance given from the Attorney General’s Office.”

Public meeting guidelines - pdf

Work is underway for the board members who choose to stay home to interact via a virtual meeting tool. The meeting will also be streamed live from the Logan County Facebook page.

[Jan Youngquist]

Ed note: This discussion took place on March 25 when much less was known concerning covid impacts. More yet is expected to be known on sales tax income and interest rates when it comes time to issue bonds, which is a separate ordinance.