North Riverside residents next month should have a clearer picture of what the village plans to do about several financial issues confronting the community, including how the village is going to pay $1.8 million left on a $2 million loan the village took out in 2009 to cover operating expenses.
On Oct. 10 at 4:30 p.m., the village’s finance committee is expected to get a recommendation for that debt repayment as well a recommendation on how to move forward with a campaign to replace water meters in the village and potentially refinancing existing bond debt.
The best case scenario for the village is that all three issues could be rolled into one new bond issuance although that might not be possible.
“Right now we’re in the process of interviewing potential financial advisors and looking at interviewing bond counsels to see if this is even doable without a referendum,” said Sue Scarpiniti, North Riverside’s finance director.
At issue is the village’s ability to pay back the service on the new debt, which could approach $3.6 million if the village is able to roll all aspects into one new bond issue.
More likely, it will be less than that since trustees, on Sept. 12, indicated they would favor phasing in the water meter replacement effort, starting first with commercial water meters (i.e., all business properties and any residential property greater than two units).
Still, the bond issue would be substantial and complicated.
The first aspect of the new issuance would be to refinance what’s left of a $2.4 million bond from 2000 in order to save money. Scarpiniti said early indicators suggest the village could save approximately $70,000 if the village refinances the bond issuance. Of the original $2.4 million issued, the village still has to pay back $895,000. The bonds mature in April 2015.
The 2000 bonds are “alternate revenue” bonds, which means the village has dedicated a revenue stream from an existing source – not property taxes – to pay the debt service.
The village would also seek to roll into that alternate revenue issue new debt related to the water meter replacement. Since the village plans on charging commercial water users to replace their meters, that debt would have its own revenue stream, outside of property taxes.
Because both parts of the debt service would be coming from “alternate” revenues, the bond issuance likely would not be subject to a back-door referendum. That is, no resident would be able to circulate a petition and get enough signatures to force the bond issue to a general referendum.
However, the issuance could still be subject to a referendum if the village’s bond counsel is not convinced the village can raise enough alternate revenue to pay the debt service.
“The village has to prove there’s a sufficient revenue stream to repay the loan without going on the property taxes,” Scarpiniti said.
The trickier part of the issuance will be convincing the bond counsel that it’s appropriate to include the remaining $1.8 million of a $2 million bank loan, which was used to fund general operations, in the deal.
The village took out the loan in 2009, pledging to repay it in two years using general operating funds. However, the village’s retail sales taxes have not recovered sufficiently to allow the village to pay the lump sum $1.8 million remaining on the loan, due in December.
“Right now the village has sufficient revenues to repay a portion of it,” said Scarpiniti.
Since the loan was backed by general operating funds and not an alternate revenue source, village officials aren’t sure the $1.8 million can be rolled into the proposed bond issue.
If it can’t, the village can choose to make a partial repayment and then go out for another short-term loan to pay the remainder. Scarpiniti said the village could choose to pledge sales taxes to pay off the new loan. While sales taxes have recovered slightly in 2011, that may not be enough to convince a bank.
“Chances are we might look at pledging other revenue streams, like the places-of-eating tax. It would be an existing steam and we’d have to prove to the bond counsel that the revenue stream is going to be there.”
But pledging other revenues streams might force further cuts to village services.
Scarpiniti said village staff will have all of their recommendations in place by the end of October. The village needs to have the bond issue decided this fall in order to be able to correctly levy taxes in December.
“We’re looking to move in the next three months, because it’s all tied in to the property tax levy process,” said Scarpiniti. “We’ll begin that process in the next month and a half to see what we’ll be levying for the next fiscal year.”