Lakewood Red(Ink)Tail Golf Club Alternative Revenue Bond Failure Featured in Chicago Tribune – Part 2

Part 2 of the Chicago Tribune said about Lakewood’s alternative revenue bond purchase of what is not called RedTail Golf Club:

Lakewood is featured as one of the villages

“where bets backfired on taxpayers…where taxpayers should have been protected form tax increases” but weren’t…where “taxpayers instead awoke to hikes they never approved, ones that even exceeded what the law normally allows.”

Lakewood did not make the front page of the story, but the financing of the golf course it bought is referenced on page 10.

The Red Tail Golf Course Clubhouse would never be put on a promotional piece.

The Red Tail Golf Course, financed by alternative revenue bonds not approved by the taxpayers, did not come with a permanent clubhouse. .

“That’s how taxpayers is upscale Lakewood in McHenry County ended up paying for a golf course they were told wouldn’t cost a them a dime.”

Although I was not quoted in the story, I have replayed the interchange between the three residents and the then-village board several times to the current village board members.

There were three of us there.

Former Village Trustee Roger Reid said that he didn’t think it was the role of government to be in the golf club business.

Attorney Jim Bishop asked if board members knew that golf courses all over McHenry County were having financial problems.

I asked, “Is this ever going to cost me a dime?”

The new West Beach House will be opened this spring.  It was built with money borrowed with voter approval.

I was assured that it would not.

The breaching of that assurance undoubtedly explains my defense of the Property Tax Cap, which prohibited the issuance of bonds without a referendum.  (I lost the fight to keep that prohibition for park districts and you can see the most recent “need” determined by the Crystal Lake Park District at West Beach.)

A sports management company made the projections that the golf course in Lakewood would pay for itself.   The Tribune article explains,

“Some residents remained skeptical, including [former Village Trustee] Roger Reid, who recalls going with a small group to the Village Board meeting to ask for assurance that taxes would not go up because of the deal.

“‘We were assured–up and down and sideways–that, “This is not going to go on you tax bill,”‘ Reid recalled.

“Then residents were hit with the catch in the law:  If projections are off, taxes can go up.

“Turns out, the town’s projections were so far off that the golf course couldn’t even pay a penny toward its loan payment for six years.  And, by the time the bond was paid off two years ago, records show, 53 percent of it was paid off through higher taxes, not the projected golf course profit.”

The Tribune article points out that no state agency verifies financial projections that will be made by firms like Power Wellness, the health club firm McHenry County College hired to justify putting taxpayers on the hook for paying back tens of millions of dollars in projected borrowed money.

Although the Illinois Attorney General has authority to “advocate for taxpayers misled by the deals…the issue has never been raised there.”

No mention is made in this Northwest Herald article of the financial fiasco that occurred in Lakewood because of the use of alternative revenue bonds.

No mention is made in this Northwest Herald article of the financial fiasco that occurred in Lakewood because of the use of alternative revenue bonds.  And there is no way to finance the MCC health club without going to referendum without using alternative revenue bonds.

= = = = =

If you into irony, the day after the Tribune article about the abuses of alternative revenue bonds ran, the Northwest Herald ran diminishing the dangers involved in using alternative revenue bonds.


Comments

Lakewood Red(Ink)Tail Golf Club Alternative Revenue Bond Failure Featured in Chicago Tribune – Part 2 — 6 Comments

  1. The Taxpayers were given an award, back during the day of the Lakewood Golf Course.

    It was the “Golden Screw Award”

    Is that award still on the wall at Village Hall??

  2. Cal, I just need to point out that these articles are getting it wrong.

    The feasibilty report that MCC is using so far on this project is NOT the type of feasibility report that the Local Government Debt Reform Act is talking about and which would be required before bonds are issued.

    There are many types of feasibiltiy reports and the one the statute for Alt Rev Bonds is referencing is a detailed revenue and expense analysis that is done with a specific bond issue and debt service schedule in mind.

  3. Public school districts are required by state law to hold a referendum to construct a new building even if no additional funding is required.

    Apparently the law is different for Community Colleges.

  4. Additions apparently don’t require a referendum. Huntley is adding to its high school with Capital Development Board money coming because of previous school construction.

  5. How does that relate to the Lakewood Golf Course “feasibility” study, Tim?

    Although I have not seen it, the description of both sound similar.

  6. Tim is both right and wrong. He’s right about what SHOULD be done, not what IS done.

    The law says “the determination of sufficiency shall be supported by the report of an independent accountant or feasibility analyst”.

    Bond counsel have decided the word “independent” doesn’t modify the term “feasibility consultant”.

    When Lakewood sold bonds, their financial advisor, who only got paid if bonds were issued, suddenly took on the role of “feasibility consultant” and opined the golf course would be profitable.

    When Marengo Park District recently sold alternate revenue bonds, their underwriter — the firm that bought and sold the bonds — served as “feasibility consultant”. When I asked Chapman & Cutler about that, I was told, and I quote, “Oh, that’s done all the time.” How’s THAT for legal reasoning?

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