A petition challenge with 532 signatures — filed Nov. 14 by local contractor and mayoral-hopeful George Georgopoulos — derailed a proposed $4 million bond issue proposed by the North Riverside village board. But the village will borrow the money anyway– issuing debt certificates at a higher interest rate.
Georgopoulos filed the petitions, presenting the signatures of more than 10 percent of registered voters in North Riverside. The petitions were meant to force the planned bond issuance to a village-wide referendum next March. But in a meeting later the same day, the board agreed to scrap the bond issue and borrow the money in a manner that did not require voter approval.
At a Nov. 14 Village Finance Committee meeting, on the advice of underwriters from broker Robert W. Baird and law firm Ice Miller, the trustees crafted a new plan to borrow the money by issuing debt certificates for the exact same amount based on the credit and standing of the village of North Riverside.
“Nothing has been delayed,” said Finance Director Sue Scarpiniti. “Timewise, [the loan] is still on track. The first week of December we will price out the credit certificates for the closing to occur no later than Dec. 15.”
The village is in a hurry to borrow money because Dec. 15 is the due date for a $2 million working cash loan taken out in 2009. The village still owes $1.8 million on that loan, and Scarpiniti told the Landmark in October that revenue from Riverside’s new one percent restaurant tax will almost cover the debt payment – predicted to generate $330,000 over five years. The debt service will cost $380,000 annually.
The difference between the two credit instruments is that the scrapped alternate revenue bonds (also sometimes called a “backdoor referendum”) would have allowed the village to levy property taxes to make up the difference if the debt could not be paid back. Scarpiniti says she is confident the village would not have been in that situation because the debt service will be covered by three revenue streams: property taxes, the new restaurant tax and more accurate water billing over the next 10 – 20 years. The village currently has an AA2 bond rating.
Georgopoulos objected to the way the village fast-tracked the bond issue. He printed and distributed 2,500 door hangers calling the decision “reckless” and asked residents to “prevent the village of North Riverside from borrowing more money.”
“People were stunned that nobody knew anything about this deal that was going on,” he said. “[The board] has to get this money by Dec. 15. Two years ago when they borrowed this money they promised they could repay it in 24 months. They were working under an assumption that the tax money’s coming in. Now 24 months later, the money is gone.” Georgopoulos said the loss of tax revenue from the coming relocation of the Edward Don Company would further cripple the village’s revenue stream. “We gave them the signatures and they said, ‘we’re going to borrow four million dollars anyway with another [financial] vehicle.'” Georgopoulos also objected to the approval of an $89,000 raise for non-union employees who had been on a pay-freeze for two years.
Debt for other projects
The $4 million debt certificates are also earmarked to cover two other expenses: the refinancing of another loan for $865,000 and a $1 million capital improvement project for water and sewer which will replace inaccurate 30-year-old water meters.
The village wants to refinance at a lower interest rate the principal balance of $865,000 left over from alternate revenue bonds issued in 2000. The 2000 loan is scheduled to mature in April 2015, but historic low interest rates might save the village between $15,000 and $20,000 Scarpiniti told the Finance Committee on Nov. 14. If the bond issue had passed, the difference in savings may have been as high as $50,000, she said. Loan advisers told her it is still worthwhile to refinance the 2000 loan, even at a slightly higher interest rate. The interest rate fluctuates but Scarpiniti told the committee Nov. 14 that “as of today” the difference in rates would be between 5 and 10 basis points, or tenths of a percent.
Water meter replacement
Replacing the village’s aging and inaccurate water meters is a top priority for North Riverside, and $1 million of the debt certificates would be dedicated to that capital project. The 30-year-old meters do not accurately calculate the usage of water and the village has been absorbing the loss, which is unsustainable, said Scarpiniti. The new radio-readable meters will cost around $330 per residence and up to $9,000 for commercial properties, she said. Covering the cost of the meters – and guaranteeing the payback of the loan to do so – is still being worked out. Passing on the cost for residential meters by charging for their installation was proposed Nov. 14 and later rejected by the board. Earlier, the board heard suggestions to pass on installation costs for multi-unit buildings and commercial properties and exempt single family and two-unit residences. The installation of the new water meters should take six months to complete, and savings could impact the village budget in the next fiscal year.