John Jung
Nick Provenzano
A majority at the last meeting of the McHenry County Finance Committee asked that the incoming Legislative Committee take up the question of whether the County Board should endorse or opposed the enactment of Pam Althoff’s and Mike Tryon’s bill to allow the McHenry County Conservation District to sell bonds without voter approval.
By the time the Finance Committee was having its last meeting, outgoing Chairman John Jung had cancelled the meeting for later that week.
The newly-constituted Legislative Committee, chaired during the new term by Nick Provenzano, was scheduled to meet January 8th.
This week a notice was received that meeting had been cancelled.
The meeting, of course, could be reinstated, should that be Provenzano’s desire.
In late 2014 MCCD issued $108 million of new bond debt, to refinance $116 million bonds from 2005 and 2007. The interest rates on new 2014 bonds were 3%-5%, so the new bonds sold at a premium and created a cash-out surplus.
$126.5 million was generated, $915,000 immediately paid to financial and legal advisors.
Where did the difference go?
Tax levy did not decrease. Budget did not decrease.
(Cash-out refi cannot benefit taxpayers if our homes remain equally debt-encumbered, as taxing body refinances, takes cash-out difference, spends the cash, and keeps extending debt into the future.)
MCCD has demanded and received more money each year, even as McHenry County property values have declined year after year.
Relentless higher spending by a taxing body without regard to declining property values is correlated: in May 2014, Moody’s downgraded MCCD debt rating, assigning a negative outlook, citing pressured property tax revenues tied to significant declines in property values and a high debt percentage ratio.
( Ignoring the economic downturn, MCCD has spent more each year without regard to the twofold impact on citizens: higher property taxes, and decreased home values. Home values are correlated to property taxes, as homebuyers may rationally choose to live elsewhere with property taxes an average 1.25% of home value rather than in McHenry County with property tax rates of 3-4%. There is no reason to believe MCCD will alter behavior in the future to take citizens’ economic wellbeing into account when making budget and borrowing decisions).
Moody’s also describes the new 2014 bonds as follows: ” …are secured by the district’s general obligation unlimited tax pledge, which benefits from a dedicated property tax levy that is unlimited as to rate or amount.”
(In addition to 4% property tax rates–potential homebuyers at any price may be scared off by the evident appetite of taxing bodies such as MCCD to incur debt with our homes as collateral. )
I believe taxing bodies have a tactic of issuing debt using taxpayers’ homes as collateral, collecting that money in a dedicated account, earning interest on that money(at far lower interest rates than taxpayers are paying for the issued debt), then moving those ‘earnings’ to general accounts and enjoying lesser restrictions on how that ‘interest earned’ can be spent .
Because readership of this blog is reduced due to Christmas, this request is to Cal and others to re-post what Susan wrote after Jan. 1, 2015.
T
he average voter does not understand how bonding works.
Maybe someone who can explain things a lot better than yours truly can issue a post for Cal to publish – a “bonds for dummies” explanation.
Here’s the really sad news.
It looks like a copy and paste to me, a naive taxpayer.
Susan has posted this so much, even I understand it.
And just what do you expect a handful of readers will do with this information?
Yes, to me, this is blockbuster information.
But to the masses?
A bump in the road to be navigated.
To the perpetrators of the crime?
Should be game over.
Non-referendum bonds should be illegal in Illinois and are illegal in some states.
Permissible examples of non-referendum bonds in Illinois, and they can vary by type of taxing district, are working cash bonds, life safety bonds, etc.
Why should taking taxpayer money without taxpayer approval be legal?
It shouldn’t.
Taxpayers routinely get taken advantage of in taxing district bond deals in all sorts of different ways, including shuffling money from one fund / account to another.
Hide and seek, kick the can.
The McHenry County Conservation District issued a lot of bonds to buy a lot of land, and now don’t have enough money to improve the land.
To begin educating yourself about the bonds in any taxing district, visit the EMMA MSRB website.
Municipal Securities Rulemaking Board (MSRB).
Electronic Municipal Market Access (EMMA).
http://www.emma.msrb.org
In the upper right hand corner of the screen, is a Quick Search, stating “Enter CUSIP or Name.”
Committee on Uniform Securities Identification Procedures (CUSIP).
Taxing districts are issued a CUSIP for bonds.
The CUSIP-6 for the McHenry County Conservation District is 580818.
Select the most recent issue for McHenry County Conservation District.
Issue Description: GENERAL OBLIGATION REFUNDING BONDS, SERIES 2014 NEW ISSUE.
Dated Date or POS Date: 12/16/2014.
Maturity Dates: 2015 to 2027.
Official Statement or Preliminary OS.
The Official Statement (OS) is the document you want to look at if you want to learn more about the financial condition of the McHenry County Conservation District and the bonds issued by the district.
That’s the document that bonds investors look at.
You will need cookies turned on in your web browser to accept the legalese.
Don’t assume anyone on the Board or in the press really understands what is happening in taxing districts bond deals.
They are not trained in bonds and all the ways taxing districts and special interest groups can play hide and seek and kick the can.
Don’t assume there is a watchdog watching over the bond deals in any given taxing district.
When a taxing district wants to issue bonds, they have to post a Bond Issue Notification Act (BINA) legal notice which is usually in the legal notices section of a local newspaper, in teeny tiny print.
Those BINA notices typically appear on the newspaper website for a very short period of time, then magically disappear.
It’s very strange.
Something so important is in teeny tiny print and vanishes.
The taxing district also needs to get board approval at a board meeting.
That’s one reason why it is so important to read board agendas, board minutes, and for the taxing district to audio and video tape and archive on the taxing district website, all board meetings.
You want a record of exactly what was said by the financial advisor, administration, and board members.
You also want to get a copy of the Powerpoint that is presented by the financial advisor to the board at the board meeting.
Many taxing districts do not post those Powerpoints on their website.
You can FOIA such Powerpoints.
My observations are based upon the more in-depth and insightful research performed by Mark and Steve Willson. I have followed Mark and Steve’s instructions:
looked at the information on http://www.emma.msrb.org
pasted in the CUSIP number for MCCD: 580818
looked at the Official Statement
looked at minutes for June 19, 2014 MCCD meeting in which following were discussed:
1. Achieving a technical quorum when members do not attend meetings.
2. Transfer of $250,000 of “interest earned on the debt services levies” (“reviewed by Chapman&Cutler)from Debt Services Fund.
3. Approval of job creation of two new jobs after one retirement.
4. Treasurer concern about Moody’s downgrading of the District’s debt rating and assigned ‘negative outlook’ : “meant that Moody’s expected another downward step for the District within their rating system at some point in the future”.
Treasurer said ” this reinforces his opinion that the District should not be expending any funds for new acquisitions of land and that all available funding should be designated toward the ‘existing ‘ needs of the District.”
Looked up verification of debt downgrade and language at this website:
https://www.moodys.com/research/Moodys-downgrades-Mchenry-County-Conservation-District-ILs-outstanding-GO-to–PR_300777
Yes it is all complicated, and multivariant problems need depthful analysis.
But how can a Board Member vote YES to something (for example a bond refi) without thoroughly understanding how over a hundred million dollars of taxpayer money will be used?
Or any amount of taxpayer money, for that matter?
Shouldn’t Board Members’ default settings be to vote “NO” on spending public money in their custody and sacred care, until they DO understand?
Re: “Shouldn’t Board Members’ default settings be to vote “NO” on spending public money in their custody and sacred care, until they DO understand?”
Until we get voters who actually check into the background of candidates this will never happen.
The majority of people who vote in County Board elections have zero knowledge of who they vote for.
It might help if we, the taxpayers, demand that elected officials sign off on every vote that they actually understand what they are voting on.
Kind of like when a Judge asks someone who is charged with a crime if he / she understands the charges made.
Prior to the vote, the Chairman could be required to ask: Have you read the background of the resolution in question and do you understand it?
I of course realize that elected officials are permitted to lie openly but at least we would have something to use in their next campaign.
“Legislative Committee Missing Opportunity to Weigh in on MCCD Non-Referendum Bond Bill”
Backstabbers.
Vote out incumbents.
Conservation of paychecks & due nothing jobs for a few.