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Result not what officials expected
EXAMINING ALTERNATE REVENUE BONDS: DAY ONE OF A TWO-PART SERIES
Different way to pay
Sequester cuts join infamous list By TOM RAUM The Associated Press
Monica Maschak – mmaschak@shawmedia.com
Deputy City Manager and Finance Director Roscoe Stelford oversees the bond issuance process for Woodstock. The city has taken out alternate revenue bonds for many of its major capital projects, including The Aquatic Center at Emricson Park, Stage Left Cafe at the Opera House (pictured) and the Woodstock Public Library.
Local gov’ts report success but caution about revenue source By CHELSEA McDOUGALL cmcdougall@shawmedia.com
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akewood officials say that without a controversial bond issuance, the RedTail subdivision wouldn’t be what it is today: beautiful upscale homes nestled on a sprawling 18-hole golf course anchored by a small strip mall. Rewind to the early 1990s, when the golf course’s developers went belly up and disappeared. Village officials used their bonding authority to rescue the development by issuing alternate revenue bonds, which are backed by identified revenue the project could bring in. Property taxes are used as a backup if revenues don’t cover the bond payments, an added security that results in lower interest rates. At the time, Lakewood officials assumed that the golf course’s membership would repay the debt the village incurred. They were wrong. RedTail wasn’t self-supporting for a number
See SUCCESS, page A9
LOCAL GOV’TS THAT USED ALTERNATE REVENUE BONDS At least a dozen local governments have issued alternate revenue bonds, or made payments on them, since 2000. • Cary Park District • Cary School District 26 • Crystal Lake Park District • Hebron • Huntley Park District • Johnsburg • Johnsburg School
District 12 • Lake in the Hills • Lake in the Hills Sanitary District • Lakewood • Marengo • Marengo Park District • Woodstock
Sources: Information was taken from annual financial reports submitted by local governments to the Illinois Comptroller’s Office. Find those at www. ioc.state.il.us/ and click on the “Local Government Division,” and then “view annual submitted annual financial reports.” Other local governments that told the Northwest Herald they have used alternate revenue bonds may not be listed, as there were no amounts listed in the annual financial reports submitted to the state. Amounts from school districts were received from Freedom of Information requests, as they are not required to file annual financial reports with the Illinois comptroller.
Bonds save money or cost taxpayers, depending on view By CHELSEA McDOUGALL cmcdougall@shawmedia.com
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sed properly, they’ve saved taxpayers hundreds of thousands of dollars in interest rates. When something goes wrong, opponents decry that they’re too risky, skirt taxpayers and bust through tax caps. Alternate revenue bonds are a funding mechanism used by some local governments in Illinois to help pay for projects ranging from sewer improvements to land purchases. McHenry County College has considered issuing alternate revenue bonds if a $42 million expansion to its health and wellness programs moves forward. But a college official said last week that it’s too early in the process to outline a cost or possible funding opportunities. MCC Chairwoman Mary Miller declined Thursday to comment on whether taxpayers should have a say when it comes to offering the college’s bonding authority to finance the proposed project.
WASHINGTON – It’s not the first time that government economic engineering has produced a time bomb with a short fuse. Back in 2011, few lawmakers, if any, thought deep and indiscriminate spending cuts, totaling about $85 billion and now starting to kick in, were a smart idea. The across-the-board cuts, set up as a last-resort trigger and based on a mechanism used in the 1980s, are a reality largely because President Barack Obama and House Speaker John Boehner, R-Ohio, failed to find a way to stop them. Republicans, influenced by tea party and other conservative factions, insisted on just spending cuts Barack to narrow the deficit. Obama Tax increases were out. Obama and the Democratic-run Senate didn’t budge from a mix of cuts and increased tax revenues. “Arbitrary” and “stupid” Obama called the auto-pilot cuts, John Boehner known as sequester. But history shows a long trail of unintended consequences from government actions – or inaction: • President Franklin D. Roosevelt, after a solid re-election victory in 1936, believed that the Great Depression was winding down. Unemployment was declining and economic activity was coming back. Roosevelt and Congress believed it was time to cut free-flowing government spending and raise taxes. The Federal Reserve tightened its financial reins. But the fragile economy couldn’t withstand the blows. The Depression roared back, lasting until the 1940s when U.S. involvement in World War II finally revived the economy. • President Ronald Reagan’s ambitious 1986 overhaul of the tax code simplified taxes and closed many loopholes, including repealing the popular tax deduction for credit-card
See VIEW, page A9 See BUDGET, page A9
LOCALLY SPEAKING
Monica Maschak – mmaschak@shawmedia.com
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REGION’S R&D SPENDING PLUMMETS A new report issued by the Chicago Metropolitan Agency for Planning shows that with investment declining, research and development jobs in the past decade have been cut in half. The report does recommend ways the region can spur advanced manufacturing through innovation, workforce development and infrastructure investment. For more, see page D1.
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