The North Riverside village board is preparing to issue up to $4 million in bonds by mid-December in order to refinance two existing debts and pay for a comprehensive water meter replacement program in 2012.
On Monday, trustees voted to hire Robert W. Baird as the underwriter and Ice Miller as its bond counsel for debt issuance, which will be three-pronged. The village will pay a total of about $68,500 for those two firms (including all fees) to handle the bond sale, which the village hopes to complete by Dec.15.
“We’re looking for an aggressive bond issue schedule,” said Sue Scarpiniti, the village finance director.
Under the timetable proposed by the village’s bond counsel, the village board will vote on the ordinance authorizing the bond sale on Nov. 21. Any residents wishing to mount a petition challenge in order to force a village-wide vote will have until Nov. 14 to do so.
In order to trigger a referendum, 10 percent of registered voters must sign a petition challenging the bond sale. According to the Cook County Clerk, there were 4,142 registered voters for the spring 2011 election, meaning at least 414 people would need to sign such a petition.
Although the village is pledging specific revenues, such as sales taxes and water charges to repay the bonds, in order to get the most favorable interest rates, the bonds are also backed by the village’s property tax levy.
If the “alternate” revenues are enough to cover the debt service, the general obligation tax levy will be abated. If not, the village must levy property taxes to cover the debt service.
2009 working cash loan
A critical component of the plan will be a bond issue to restructure the principal balance remaining on a $2 million working cash loan the village took out in 2009 in order to meet its operating expenses. In December the entire principal balance of $1.8 million comes due, and the village does not have the funds to make that payment.
According to Scarpiniti, the plan at this point is to finance the debt service on the restructured working cash loan by pledging revenue from North Riverside’s restaurant tax, which was imposed in 2010. That tax is expected to bring in $330,000 annually, which would cover most of the annual debt payment, given a five-year repayment schedule.
Over five years, the village’s annual debt service payment on the $1.8 million, including interest, will be approximately $380,000, according to Scarpiniti.
The interest rate on the restructured working cash loan will depend on whether the village can issue the bonds as tax exempt or taxable. Tax-exempt bonds can be issued at a lower interest rate but have a maximum repayment schedule of five years. Taxable bonds come at a higher rate and can be extended over a longer period of time, up to 15 years.
According to Scarpiniti, it won’t be until late November before the village will know the tax status of the working cash loan restructuring bond issue. The working cash loan itself is considered a taxable issue.
A key reason the village chose Ice Miller as its bond counsel is that the firm is willing to examine whether the working cash loan bonds can be issued as tax exempt, which would be more affordable in the long run.
Two other bond counsels interviewed by the village, Chapman & Cutler and Ungaretti & Harris “were more conservative with their interpretation of the IRS tax laws as it related to this particular financing,” Scarpiniti wrote to finance committee Chairman Thomas Corgiat in an Oct. 6 memo.
“While the final taxability status of the working cash loan has yet to be determined, Ice Miller is more willing to explore the tax-exempt status of such a refinancing, thereby making it more affordable for the village to extend this debt,” Scarpiniti said.
The village needs to complete the bond issuance by mid-December because the entire balance of the working cash loan comes due on Dec. 15.
2000 alternate revenue bonds
The second part of the proposed bond issuance is refinancing bonds issued in 2000. The debt service on those bonds is being funded through sales taxes the village collects, said Scarpiniti.
The principal balance left on that bond is $865,000, and it is scheduled to mature in April 2015. Scarpiniti said that by taking advantage of historically low interest rates, the village could save $50,000 over the life of the loan by refinancing.
Sales taxes would still be pledged for the debt service, Scarpiniti said, and the debt would still mature in 2015.
New debt for water meters
Finally, the village plans on issuing about $1 million in bonds to pay for a complete overhaul of the water meter and billing systems in North Riverside. The money would go to pay for the new commercial and residential water meters, the labor to install them, equipment to transmit water meter information to a central computer and new software to bring water billing in-house.
The bond issue would be paid back by the village over 15 years and the debt service would be funded by water revenues, which are expected to be higher once the new, more efficient meters are installed.
Discussions among members of the village board at a finance committee meeting on Oct. 10 and at a meeting in September indicated that the village intended to charge its commercial and multifamily residential customers for installation of the meters, but not the owners of single-family residences and two-unit buildings.
Installing the new water meters throughout the village should take about six months once that work begins.