Mike Tryon
A bill sponsored by State Rep. Mike Tryon that would allow the McHenry County Conservation District to sell bonds without a referendum is on Third Reading on the Illinois House floor.
Joining Tryon in sponsorship is State Rep. Barbara Wheeler’s cousin, Rep. Ann Williams (D-Chicago).
I had an engaging conversation with Tryon yesterday afternoon.
He told me that the MCCD is the only tax district is Illinois who is prohibited from selling non-referendum bonds.
He explained that the original referendum language gave the Conservation District the ability to sell non-referendum bonds.
He said that the reason for the current prohibition was a technical problem in the statute books, that the bill he picked up from State Senators Pam Althoff and Karen McConnaughay would correct the problem.
He argued that taxes would remain the same.
I replied that taxes would go down as the bonds were paid off, if his bill were not enacted.
I told him that I thought that qualified as a “tax hike.”
The bill in question must be passed today if it is to gain approval during this General Assembly, because House Speaker Mike Madigan is adjourning the House today.
So Cal, one might call it a voodoo tax hike?
I think that a tax hike happens when taxes are actually increased.
I still think you deliberately mis characterized this bill as a tax hike when it clearly isn’t.
If taxes would decrease, but action by governmental officials allows them to stay at the same level, I’d call it a tax hike.
You are welcome to your interpretation, but more money will come out of your checking account to pay for the newly issued bonds than would otherwise have been the case.
Whackamole, I would call it a “foregone conclusion” tax hike.
If MCCD has the authority to issue non-referendum debt, then there is about one chance in 100 that they won’t.
And when they do, it will because of this law, and it WILL increase property taxes over what they would have been otherwise.
If you disagree with my contentions, please explain the exact error in my reasoning or facts.
Steve, you’re forgetting about the recent refinance. Because of current low rates, the levy for the interest payment on the outstanding bonds will decrease, thereby actually cutting the amount the taxpayers are taxed for MCCD bonds.
But, as you found out in your research yesterday, the principle remains the same.
The total bonded indebtedness the District can have is capped and the District is currently at that cap.
You’re right that taxes will go up if and when bonds are issued, but that can’t happen until there is “cap room.”
You, Cal and I will fight the issuance of any bonds by MCCD that aren’t for a good reason, but that eventuality is a ways off.
Whackamole, you are incorrect.
The new refunding bonds have the same interest rate — 5.00% — as the old bonds.
Debt service will NOT decrease as a result of the refunding.
The District sold the bonds at a high premium and kept that money — they didn’t pass the savings on to the taxpayers.
Your argument amounts to “give them the chance”, which really means “give them the opportunity to do an end run around the voters”, an opportunity experience shows they will take advantage of.
The purpose of systemic limits is to prevent that type of behavior.
“You, Cal and I will fight the issuance of any bonds by MCCD that aren’t for a good reason, but that eventuality is a ways off.”
It’s only as far off as the time it takes to pay down the current borrowing.
And when that day does come, you’ll have one less arrow in your quiver, and it’s the biggest arrow you can have: voter consent.
With the state swimming in debt, this is precisely the wrong time to give government at any level an easier path to borrowing.
Instead of conforming MCCD to the rest of the state by allowing non-referendum borrowing, perhaps the state could take a lesson and enact legislation requiring that more local borrowing be put to the voters for approval.
Steve,in addition to reading Cal, you might want to read the Northwest Herald.
They actually cover MCCD.
On November 5th Emily Coleman wrote a story with the headline, “McHenry County Conservation District to save $12M by Refinancing Debt.”
I’d send you the link, but it’s behind a pay wall.
Are you saying that you’re right and they’re wrong?
Yea ‘mole’, I believe Steve Wilson, whom I also believe to be a Muni Bond Analyst.
Your Northwest Herald “Emily”, has also written some good cooking and travel articles, as well as her stabs at Public Finance.
Non-referendum bond debt issued for new projects should be illegal.
Voter should approve all new bond debt.
Remember this drama during the next tax hike referendum.
During the referendum, the taxing district states the bonds for the referendum will be paid of in x # of years (20 yearsr, 15 years, 10, years, whatever the term of the bonds).
But at the end of the term, it’s not uncommon, just as in this scenario, for the taxing district to issue more bonds, in the form of non-referendum bonds, instead of letting taxes decrease.
Or, the taxing districts are sometimes nice and actually ask for voter permission via a referendum.
Too many of these taxing districts are revenue machines.
And the machine has lots of tools and tricks at its disposal.
It’s all legal.
But in the case of non-referendum bonds issued for new projects, it shouldn’t be legal.
First the Conservation District borrows money to buy farmland, decreasing agriculture related tax revenue.
Well in some circumstances the conservation districts rents out the farmland.
But the farmer that resided on the purchased property rarely gets to stay.
But the bonds used to purchase the farmland is rarely enough to do whatever “improvements” to the land that the conservation district desires.
So then more bonds have to be issued to improve the land with paths, wildlife restoration, etc.
Now some of that is desirable to many folks.
But what is rare if not unheard of is for a conservation district or forest preserve to tell you upfront when they purchase the land, how much it will then cost them to improve the land.
See Cal’s latest post on this.
Have a feeling we will soon see what constitutes “a ways off”.
Yes, Whackamole, I’m saying the Herald is wrong.
They print the press release, they don’t do deep financial analysis.
I, on the other hand, wrote the original program to optimize the structure of the escrow accounts used in refunding bonds when I was an head of research at First Chicago.
The math, though, is simple: the new bonds have 5.00% coupons and the same amounts maturing each year as the old bonds, which have 5.00% coupons, plus or minus a tiny bit.
The District collected $12MM net but didn’t cut the property tax rate for debt service.
Steve, net cost of the bonds to the taxpayer is the 2.58%, not the coupon rate.
The coupon rate is set higher because the bond market wants the cash flow payments.
It is my understanding this is how the vast majority of all bonds are issued, and it is in fact how the District’s 2007 bonds were issued. (The coupon rates of the 2007s were almost all 5% and yields were 4.5%)
The net yield/cost of the 2007 bonds was about 4.6% vs the 2.58% cost of the new bonds.
The District issued $108,215,000 in bonds and retired $116.4 million in debt.
This was done from the premium generated, which as you know is the amount the bond buyer paid over par to bring the coupon rate down to the effective rate/yield.
The net present value savings of the refunding is $12,133,604.
This is a hard number as the refunding is complete and is not subject to interpretation.
Additionally, the actual amount levied will be reduced by $14.3 million dollars over the life of the bonds.
D.J., you may be familiar with Emily’s work for Sauk Valley media on the Rita Crundwell case.
Ms Crundwell was the former Dixon Comptroller and Treasurer who is now serving a 19 1/2 year sentence for embezzlement. Here’s the Wikipedia:
http://en.m.wikipedia.org/wiki/Rita_Crundwell
Emily is a professional journalist and ethical about checking facts before publishing.
Wackamole, you keep shifting ground.
The District sold new bonds for approximately the same coupon rate as the old bonds, and for the same amounts in each maturity.
Those are the two factors that determine the money to be raised each year in property taxes.
So since they are essentially identical, there will be NO SAVINGS to the taxpayers.
Property taxes will NOT go down.
Now, you are correct, the bonds were sold at yields lower than the coupon, so the District collected way more money than they needed, about $12 million by their claim.
But that is NOT a savings to the TAXPAYERS.
It is just more money the District will.
They could have sold the bonds at lower coupons, reduced the premium by $12 million, and passed the savings along to the taxpayers.
They chose not to.
The purpose of this exercise is not to defend a position regardless of whether it is right or not, but to find the truth.
So if you think I’m wrong, then show me where the TAXPAYERS will save money.
If you can’t then please admit I’m right on this point.
Then we can move on.
Willson knows what he’s talking about.
The Conservation District is not the only taxing district playing this bond game and other bond games to generate more revenue for the taxing district.
Once again there are often very generous profits for the special interest groups involved in issuing the bonds.
Another thing to remember, bonds are generally outside the tax cap.
Very few newspaper journalists are trained about bonds.
It’s not part of the college journalism curriculum.
The people in the bond industry who consult to the taxing districts have the most knowledge.
Sometimes people within the taxing district have quite a bit of knowledge about bonds, but a lot of that depends on the size of the taxing district and the expertise of the financial folks in the taxing district.
Board members and council members often do not have adequate knowledge of bonds and are easily snowballed by administrators or the financial consultants.
Many legislators don’t know much about the bond industry and even if the do may sell out to special interest groups.
And remember legislators sign about 500 new public acts a year.
Not sure how many bills they actually vote on.
Much less how many bills they consider.
Legislators are often spread pretty thin when it comes to analyzing any particular piece of legislation.
It’s time some more transparency be shined on bonds.
The EMMA MSRB website is a good start, it wasn’t even around in its present form until a few years ago.
There seems to be no good reason why non referendum bonds are even legal to issue new debt (as opposed to refunding / refinancing).
And as we have seen above, refunding / refinancing can be a way for a taxing district to obtain additional revenue.
Now if the taxing district is obtaining new revenue, how well are they analyzing the costs to obtain that new revenue?
How often do you think a taxpayer checks in on the profits being made by special interest groups in conjunction with issuing bonds, be they referendum bonds or non-referendum bonds.
How often do you read about those profits in the press?
There are a lot of costs from various sources associated with issuing bonds.
It’s prudent to shop around for competitive pricing.
Tryon the tax-traitor at it again …….
Tryon likes to attend wine and cheese soirees w/ his libtard elitist friends in Barrington and Crystal Lake …..
what he really needs is to be tarred and feathered.