MCC Plans to Sell $42 Million in Non-Referendum Bonds – Part 3

This is Part 3 of Stephen Willson’s biting critique of the McHenry County College Board’s decision-making process that consultants hope will lead to the issuance of $42 million in bonds without a public vote. Interspersed among his comments are the essential slides presented before Board members decided to approve Phase Two at the cost of $50,000. The images are what the Board saw before deciding to move ahead on what is called “a public-private partnership.”

Here are the consultants estimates of income and expenses during the first three years of operation. According to a Freedom of Information Request there is no further documentation. My rough estimate is that about 40% of the revenue is to come from tuition from new student enrollment.

They’re obvious questions that would occur to any business person who was thinking of investing millions of dollar of his or her own money rather than taxpayers’ money, and anyone could gather the evidence to answer the questions in a matter of a few hours with Google and a handful of phone calls.

These financial assumptions for revenues that were shown the MCC board members. The YMCA, by the way charges $48 per month. Centegra’s Health Bridge costs $55 a month., according to its web site. (I couldn’t fine someone to answer the phone to find out if that was just a holiday special.) Both non-goverment clubs have pools, which the proposed MCC health club will lack.

Second, MCC has an institutional research department! They have the expertise on staff, but chose to pay consultants with obvious conflicts of interest tens of thousands of taxpayer dollars.

Here are the expenses that were projected by the consultants.

MCC plans to fund this project with bonds backed by property taxes, and to issue the bonds by using a loophole to avoid a referendum.

No suggested financing option involves voter approval. The next slide shows how interest rates are low.

Unless you, as community leaders, act, MCC will succeed.

The risks listed do not include voter disapproval of the project.

If you don’t want your taxes to go up, I urge you to read this letter and to act on it.

Phase Two has been approved by the MCC Board. It costs $50,000.

The facts presented here are independently verifiable, and they do not support MCC’s proposal.

  • Training students for jobs that will not exist is a cruel hoax on our youth.
  • Trying to pass off a marketing presentation as a feasibility study is a hoax on the people.
  • Spending millions of dollars on an unneeded program is a hoax on the taxpayers.
  • Purposely seeking a loophole to issue debt without a referendum is a hoax on the voters.

A Call to Action

Decisions about large new government programs should be based on facts. It is my hope that by writing this letter, I will encourage community leaders to consider the facts, to think about the issues, and, above all, to speak up and act.

  • I urge MCC to either rebut my facts or kill the project. Silence is a disservice to the public.
  • I urge community leaders to call members of the MCC Board and express your opinion.
  • I urge community leaders to write letters to the editor to inform the public.
  • I urge the Northwest Herald to publish serious investigative articles if it wishes to be taken seriously. “He said, she said” reporting will not do. Hard questions must be asked of the administrators at MCC and articles must present independently developed facts to readers, not just information provided by MCC or conclusionary opinions.

I urge all of you not to remain silent. You are community leaders. I ask you to LEAD.

Unless you act, your taxes will go up.

Sincerely yours,

Stephen Willson
Lakewood, Illinois

= = = = =
The MCC Board will meet tonight. One of the subjects will be this proposed health club.

Part 1 is here.

Part 2 is here.

Part 3 is here.


Comments

MCC Plans to Sell $42 Million in Non-Referendum Bonds – Part 3 — 12 Comments

  1. Would the $8 per credit hour student infrastructure fee, be a new fee to help finance this this project?

    What are debt certificates…are they bonds?

  2. They are a name for money borrowed by a public body without a referendum. The money must be repaid from tax district revenue, but have the advantage to taxpayers to not being capable of forcing up tax rates if the tax district officials can’t find the money to make payments.

    Because there is more risk to the borrower, interest rates on debt certificates are generally higher than those on bonds.

  3. Cal, pretty good description of what a Debt Certificate is.

    I would just like to add a few observations.

    Debt Certificates are really just an installment purchase borrowing.

    They are payable from “any and all lawfully available funds of the district”.

    That means certificate holders are entitled to any funds of the district such as tuition, revenues from the operation of programs and facilities, etc. There is no separate tax levy so technically the issuance of Debt Certificates will not “raise taxes”. In fact, the statute prohibits a tax levy to pay the Debt Certificate.

    That being said, money is money and monies spent to service debt payments on this particular project is money not available for other things. I read somwhere where a commenter was saying the College was using a “loophole” to do the project without the consent of the voters.

    That comment by the poster was inaccurate and misleading.

    He can question the need for the project but Debt Certificates are specifically authorized by statue to allow local governments to borrow money for a term of not to exceed 20 years by a simple majority vote of the Board. This is not a loophole. My Wester’s dictionary defines loophole as:

    “a means of escape; especially : an ambiguity or omission in the text through which the intent of a statute, contract, or obligation may be evaded.”

    Debt Certificates are not a loophole, they are specifically authorized in very clear language. Nothing ambiguous about that.

    Tim Stratton
    Former MCC Trustee

  4. Hi Tim

    I would like to talk to you about this if possible. Be nice to see you again. Give me a call at 815-245-9204….that goes for Stephen too

  5. Mr. Stratton, while debt certificates are one option, the board has focused on issuing “alternate revenue” bonds, like the bonds issued by Lakewood for their golf course.

    These are general obligation bonds, payable from a property tax levy separate from the Education Fund, so MCC could use this option and NOT cut into their operating revenues.

  6. Community Colleges, municipalities, park districts, local school districts, conservation districts, and other local taxing districts should not be allowed to issue tens of millions of dollars of public debt, be it in the form of bonds, alternate bonds backed by taxpayers, debt certificates, or other financial instruments, without referendum.

    Just because it’s legal doesn’t mean it’s in the best interest of taxpayers.

    Issuing public debt without referendum means special interests such as underwriters (middleman between taxing district and investors), bond counsel (attorneys), bond ratings agencies, transfer agents (bank or other financial institution that tracks principal and interest payments to bond owners), architects, construction management firms, and other firms profit with no vote on the measure by taxpayers.

    Referendum is a more effective method of transparency in approving tens of millions of dollars of public debt, as apposed to board approval without referendum.

  7. Mr. Wilson, I am aware of what an Alternate Revenue Bond is.

    Alt Rev Bonds are indeed General Obligation Bonds but they are intended to be paid primarily from pledged revenues or funds other than a tax levy.

    They do however, contain a “back up” or “alternate” property tax levy that only gets levied in the event the revenues from other sources fall short to pay the bonds.

    There are serious consequences to the issuer of the bonds if they ever have to access that tax levy.

    These bonds are again, not a loop hole, as was previously claimed above.

    A loop hole is a way to evade a statute.

    In this case Alternate Rev

    Hardly a loop hole.

    Again, criticism of the project is fair.

    Distortion of the facts is not.

  8. Mr. Stratton, there are NO serious consequences for a government that issues Alternate Revenue bonds and then relies on property taxes.

    They get their project, they get their operating revenues, and the taxpayers get higher taxes.

    And if you don’t believe me, ask the people of Lakewood about the golf course they paid for for 20 years.

    And hiring a “consultant” with an obvious conflict of interest IS a loophole, and I know that, because I served on the advisory committee that wrote the law for Alternate Revenue bonds.

    It was intended for non-home rule cities to get cheaper financing for things like their sewer systems, not for community colleges to build health clubs.

  9. In fact, Mr. Stratton, I had a LONG conversation with an attorney from Chapman and Cutler about exactly what constitutes an independent consultant when the Marengo Park District sold Alternate Revenue Bonds recently.

    The “consultants” for the college put together a 26 slide PowerPoint sales presentation and called it a “feasibility study.”

    This was no feasibility study.

    Feasibility studies are performed by independent parties, not firms that want more business.

    Feasibility studies have hundreds of pages of data to support their projections.

    This 26 slide presentation had zero data to back up their ludicrous claims that the health club and the new program would be self-supporting.

    Further, the history of the College strongly contradicts the claim that the expanded health program could be self-supporting from tuition alone.

    The College relies on tuition for 25% of its budget, but somehow this program will be self-supporting?

    As a bond analyst, I wouldn’t buy these bonds WITHOUT a property tax back-up, because I would regard the probability of the program being self-supporting as close to zero.

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