This week council heard a Northern Trust presentation titled “Stormwater Financing Analysis”. What Northern Trust floated was the idea of not dedicating $6 million or more each year for Stormwater projects, but instead financing it with:
- $6 million a year in loan (via bond) payments each year for 30 years for floating $180 million in bonds that would give us $108 million in funds for projects.
- $4 million a year in loan (via bond) payments each year for 30 years for floating $120 million in bonds that would give us $72 million in funds for projects.
They also floated the concept of Non-Self Supporting Debt Outstanding as the correct debt figured against the Village EAV. There is ‘only’ $5 million in that kind of debt, because the other $36+ million in debt is paid for by the Parking Fund (for Series 1999), the TIF district (for Series 2000, 2001, 2003A), and property taxes (series 2002, 2005).
This is the first time I’ve ever heard about recategorizing debt into Self-Supporting and Non-Self Supporting types for debt ratio purposes here in Downers Grove, probably because our local government has slid funds around as needed to cover abatements and debt reduction in the past, making ‘self-supporting’ and ‘non self-supporting’ pretty much a moot point.
Note: The concept of “self-supporting” debt is that borrowed bond debt will fund projects that generate enough revenue to pay the debt service obligations. Examples of this type of debt include Tax Increment Financing (our downtown), Special Service Assessments (brick streets) and the Water Fund. GO self-supporting debt payments are a general Village obligation and must be paid from the property tax levy if revenues don’t meet debt service. Here in Downers, we’ve had to rely on property taxes to make up shortfalls in several “self-supporting debt funds”, so it doesn’t always work out in real life like it’s supposedly does on paper.
The net result is hey! We can borrow a bunch more money than we thought and not wreck our credit rating.
They also went over spreads, rate lock-ins, and interest only payments to start (yeah, I know that sounds like sub-prime and Alt-A lending come-ons), and pitched council on refi’ing Series 1999, 2000, 2001, and 2003A bonds at a lower rate, claiming that would save $173,134.00 -which is a good deal if true.
I was surprised at the 30 year bond terms. Usually muni bonds are for 20 years or 10 years, but the spokesman said the rates were not much different, although he did not quote any TIC (Total Interest Costs) on comparable 20 and 30 year loans.