Last month a finance expert laid out some financing options for a new Brookfield Public Library board as the board considers plans to build a new library.
In March, the library entered into a letter of understanding to buy the Brookfield United Methodist Church building at 3541 Park Ave. for $615,000. The deal is expected to close in July. The board hopes to eventually demolish the church and build a new library on the property.
At an April 25 library board meeting, Jamie Rachlin of BMO Capital Markets told the board that they have three options as to financing a new library.
“The goal is to not go to referendum,” Rachlin said explaining other ways for the library to borrow money. “You do have resources to do that, but it’s going to have a significant impact on your [cash] balance.”
Rachlin said that based on the library’s current financial condition, it has the capability of funding a $7.4 million project without asking the voters for more money. Rachlin said the library has a borrowing capacity of $5 million and could use $2.4 million in cash reserves to build a new library.
Financing options include a mortgage, or issuing debt certificates or alternate revenue bonds.
Rachlin spent most of his approximately 20-minute presentation discussing the latter two options, since mortgage loans are not tax exempt and carry the highest interest rates of the three options.
Alternate revenue bonds are general obligation bonds that are payable from the library’s tax revenues, but are also backed up by the village’s property tax collections. They are subject to a 30-day notice and petition process.
Alternate revenue bonds only require a referendum if enough people sign petitions asking for one. This process is often called a back-door referendum.
Debt certificates are a hybrid lease/installment purchase contract type of contract that are issued to allow a public body to purchase tangible property. It is the most straightforward borrowing option and does not require any notice or petition period, Rachlin said. Debt certificates are ultimately an obligation of the village as a whole and are a slightly more expensive way of borrowing – and with interest rates one-quarter to one-half of a percent higher than alternate revenue bonds, Rachlin said.
“I kind of find that the alternate revenue bonds get you the lowest rate,” Rachlin said. If avoiding any chance of a referendum is a priority then debt certificates would be the way to go.
Rachlin said that if a library would cost more than $7.4 million to build, the library could call for a referendum to seek the additional monies needed.
“You wouldn’t have to go for the full amount in a referendum,” Rachlin said.
After the meeting library board members said that they are still in the exploring options stage.
“He did a good job of explaining options and no decision has been made at this point,” said Brookfield Library Board President Dianne Duner.
Duner said that it is premature to decide whether the library board would put try to avoid a referendum.
“We’re looking two to five years down the road,” Duner said. “Who knows what the economic conditions are? I’m not making a long-term prediction.”
In the public comment portion of the meeting, Duner engaged in a back-and-forth with Brookfield resident Frank Clarke, who suggested that $615,000 was too high a price to pay for the church property.
Duner said the library made lower offers at $400,000 and $500,000 that were not accepted by the church. She said the property was appraised at $750,000.
Karl Sokol, the pastor of Compassion United Methodist Church, said that the church received offers for more than the $615,000 the library is paying for the property.
“The highest offer was $725,000,” Sokol said.
That bid may have been preliminary. Sokol said that two parties in addition to the library were interested in the property – another church and an architect who was interested in using the property as both a business office and a home.
Sokol said he didn’t know who made the $725,000 offer.
“I actually don’t know,” Sokol said. “Unfortunately, I wasn’t part of all that nitty- gritty stuff.”
Sokol’s mother, Linda Sokol Francis, who was more involved in the negotiations, is out of the country and could not be reached.
Sokol said the church rejected the higher offer for two reasons.
“I wasn’t sure it was going to come through as cleanly as the library’s [offer], quite frankly,” Sokol said. “Another big factor in all of it is that I love the library, so I think it would be a better civic use of the property.”
The library will host three meetings this month to get community input and feedback on plans for a new library. The first meeting is scheduled for Wednesday, May 16 at 1:30 p.m. Other meetings are scheduled for Saturday, May 19 at 10:30 a.m. and Monday, May 21 at 7 p.m.