McHenry County Blog

David McSweeney knows how to pick ‘em.

And Jack Franks has been a master of gaining publicity for virtually his entire 14-year legislative career.

McSweeney came up with the idea to reform the alternative revenue bond process and had a bill drafted.

The changes he proposes and Franks buys into would give the taxpayer s of McHenry County College a change at defeating ill-conceived projects like the minor league baseball stadium and the proposed health club at the ballot box, rather than paying higher taxes for a couple of decades if the revenue stream identified to pay off non-referendum bonds turns into a trickle.

For those who don’t dip into McHenry County Blog that often, alternative bonds are a method approved by a previous state legislature that allow government entities, such as Lakewood with its early 1990′s golf course purchase, to borrow money for projects without going to referendum.

The premise in Lakewood’s case was that golf course revenues would pay off the bonds.

And who came up with the projections?

It was a golf course management company with no skin in the game.

I feel so personally involved because I and other Lakewood homeowners paid 53% of the cost of an amenity which I have never used.

The alternative bond document forced subsequent village trustees to flay repayments off the hides of us taxpayers.

McHenry County College is now trying to do this in order to build a health club and classrooms.

That addition space will cost a lot more than the now-re-named RedTail Golf Course, although the price per homeowner, if muscled through by the MCC Board and the revenue projected by the health club operator company Power Wellness don’t pan out, would probably be far less than the $500 a year that I remember paying.

There is currently a way that taxpayers can force a referendum when a taxing district like McHenry County College decides to borrow money without asking voters for permission, but the number of signatures needed on a petition is virtually impossible to gather.

In MCC’s case, state law now says that signatures of 7.5% of the registered voters must sign the petition.

That’s 7.5% of 182,766 voters.

Multiply that out.

My hand multiplication tells me that’s 13,709 signatures.

A bit more than the 500 that Jack Franks had to gather to put the County Executive referendum on the ballot, so he can certainly understand the statutory hurdle of those wishing to stop their tax bill from going up because of alternative revenue bonds.

The McSweeney-Franks bill would lower the petition signature number to 5% of the voters or 500 signatures, whichever is less.

The legislative proposal would also increase the length of time to gather those signatures from 30 to 90 days.

That would at least give the taxpayers a chance if the junior college decides it wants to borrow over $40 million without asking voters’ permission.

Besides the Tribune article on Wednesday and mine on Tuesday, the Northwest Herald has one today.

While the Tribune did not make the McHenry County College connection, the NWH did in its first sentence:

“Legislation filed this week in Springfield could make it harder for McHenry County College to fund its proposed expansion.”

And, the sub-headline reads, “The locally sponsored legislation could affect MCC plans.”

The article even mentions RedTail Golf Course.

And a commenter under the article “Patrick F” of Cary points out that the Cary Park District was planning to buy a golf course (its second) with bonds not approved by voters.  (I believe he is mixing up the power that all park districts and other local tax districts that had non-referendum bonding in 1994–may be a year off.  State legislation I actively opposed allowed those with unpaid non-referendum bonds to forever use the amount being paid back in the year in question to finance new borrowing without voter approval.  That is how the Crystal Lake Park District is financing its new West Beach House.)

See articles summary of Tribune articles about what happened to Lakewood homeowners here:

• Lakewood Red(Ink)Tail Golf Club Alternative Revenue Bond Failure Featured in Chicago Tribune – Part 1
• Lakewood Red(Ink)Tail Golf Club Alternative Revenue Bond Failure Featured in Chicago Tribune – Part 2

Tuesday’s McHenry County Blog article (“McSweeney and Franks Send Shot Across McHenry County College’s Bow) about newly-introduced House Bill 983 can be found here.

 

 

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6-7-7 Addendum:

Since I wrote this article, Tim Stratton has informed me that he has left the firm of Hutchinson, Shockey, Erley & Co.

That firm is one of several seeking to become McHenry County College’s financial adviser on the baseball stadium deal.

Stratton is a former MCC trustee and a current Glencoe Park District board commissioner.

At the May 24, 2007, board meeting, the MCC board postponed selection of a financial adviser. Stratton informed me that he left the firm on May 30, 2007.

Since Stratton left the firm the week before I wrote this article, it seems to me that Stratton no longer has any stake in whether his old firm wins the MCC business.

The thrust of the original article was that Stratton’s previous service on the MCC board and his work on the baseball stadium complex since last August (documented below) would give Hutchinson, Shockey the advantage.

Any advantage that Hutchison, Shockey had may now have disappeared with Stratton’s leaving of the firm.

The article below has been altered to represent Stratton’s change of employment.

* = * = * = * = * = *

Taxpayers won’t know until the McHenry County College Board votes which investment banking firm will be selected to become MCC’s financial adviser on the minor league baseball stadium.

Tim Stratton certainly worked hard to interest MCC officials in Hutchinson, Shockey, Erley & Co., as can be seen from the emails below. The firm he just left is competing for the commission from MCC’s $35 million debt certificate sale.

Stratton certainly appeared to have the inside track.

He has been working with college staff since last summer.

He warns the college not to expect “any significant revenue from the project” for the first five years!

Even before the college signed its no-bid contract with Mark Houser’s Equity One Development Company, Stratton was testing the waters.

As a result of a Freedom of Information request, McHenry County Blog received eleven days later the contents of five Stratton emails going back to August 1, 2006.

The first outlined four types of debt certificates.

“Regular debt certificates with interest only for the first five years,” was first.

Stratton’s email say this is “the cheapest but least flexible option.”

The second is “Regular Debt Certificates where we Capitalize interest for the first three years (the maximum allowed by law—this is the most expensve option because you are paying interest on interest.”

Does that sound like the District 300 deal or what?

The third option is “CAB Debt Certificates where there are no payments until 02/01/2012 (no call features with pure cabs as it is too cost prohibitive).”

Listed fourth are “Convertible CAB Debt Certs which exist like CABS until they convert to current interest (regular Debt Certs) on 02/01/2011 (this gives you flexibility of CABS but also allows for a call feature so you could repay them earlier—slightly more expensive than straight CABS but way more flexible.”

His email continues,

Option 1 is clearly the least expensive s our comparison graphs show but it does not require available cash to pay the interest from the time of issuance and only gives you relief from principal payments the first five years.

The convertible option number 4 gives you CAB freedom from both principal and inters the first five years PLUS the flexibility of being able to pay them off early or refund them with another bond issue down the road.

Option 2 is the most expensive because of all that capitalized interest. If the goal is to avoid paying anything for the first five years, I would recommend options 3 and 4 with a preference on option 4 because of the call feature. We could do a call feature on option 3 but it would be so expensive that it wouldn’t be worth it as call features on CABS are not well received in the market.

Stratton also calculated “what each of these options would need from a tax standpoint to pay the debt.” He points out that MCC cannot levy a new tax for repayment.

How’s how did he end last summer’s email?

We look forward to working with MCC on this project! Talk to you soon.

And, there is a special note to MCC President Walt Packard:

Walt—I’m also working on some legislation for impact fees and have a meeting with Senator Althoff this week. Let me know if you are interested in talking with her some more about this. Mike Monaghan has invited me down to talk about this issue to the ICCTA (Illinois Community College Trustees Association) in September.

Stratton’s second email is dated October 5, 2006. Apparently Stratton has been tasked to contact bond counsel Chapman & Cutler to find out if the debt certificates could be used to reimburse the college for “any costs associated with the land purchase.

“If the College has any interest in adding those costs to the financing IRS regulations require the adoption of a resolution stating the intent…”

The resolution was attached.

Stratton says he will be in Crystal Lake Friday morning, “if you would like to meet Friday or any other time. Talk to you soon.”

Email number 3 talks about the impact fees, but the real purpose seems to be to tell Ron Ally that Stratton has “forwarded our new analysis to Todd and you the other day.”

The would-be bond advisor says, “…there may be a way we can get the costs down even further in the early years by shifting more of the principal to the long end of the deal if you need that.”

Then Stratton reveals that Chapman & Cutler believes “the deal will have to be done on a taxable basis” as “a result of the private use issues.” He suggests splitting the issue “into a taxable and tax exempt piece.”

Even the friendly salesman, Stratton concludes, “As always, call or email with questions. I would also be happy to come out and discuss any of this in person when the time is right. Hope all is well and talk to you soon!”

On April 26, 2007, Stratton sends MCC his firm’s Request for Proposal and cover letter.

In it is the following accurate statement:

More recently, Tim has done substantial work with McHenry County College on financial modeling for the land purchase and stadium financing.

* = * = * = * = * = *
6-7-7 Addendum:

Since I wrote this article, Tim Stratton has informed me that he has left the firm of Hutchinson, Shockey, Erley & Co.

That firm is one of several seeking to become McHenry County College’s financial adviser on the baseball stadium deal.

Stratton is a former MCC trustee and a current Glencoe Park District board commissioner.

At the May 24, 2007, board meeting, the MCC board postponed selection of a financial adviser. Stratton informed me that he left the firm on May 30, 2007.

Since Stratton left the firm the week before I wrote this article, it seems to me that Stratton no longer has any stake in whether his old firm wins the MCC business.

The thrust of the original article was that Stratton’s previous service on the MCC board and his work on the baseball stadium complex since last August (documented below) would give Hutchinson, Shockey the advantage.

Any advantage that Hutchison, Shockey had may now have disappeared with Stratton’s leaving of the firm.

The article below has been altered to represent Stratton’s change of employment.

* = * = * = * = * = *

Taxpayers won’t know until the McHenry County College Board votes which investment banking firm will be selected to become MCC’s financial adviser on the minor league baseball stadium.

Tim Stratton certainly worked hard to interest MCC officials in Hutchinson, Shockey, Erley & Co., as can be seen from the emails below. The firm he just left is competing for the commission from MCC’s $35 million debt certificate sale.

Stratton certainly appeared to have the inside track.

He has been working with college staff since last summer.

He warns the college not to expect “any significant revenue from the project” for the first five years!

Even before the college signed its no-bid contract with Mark Houser’s Equity One Development Company, Stratton was testing the waters.

As a result of a Freedom of Information request, McHenry County Blog received eleven days later the contents of five Stratton emails going back to August 1, 2006.

The first outlined four types of debt certificates.

“Regular debt certificates with interest only for the first five years,” was first.

Stratton’s email say this is “the cheapest but least flexible option.”

The second is “Regular Debt Certificates where we Capitalize interest for the first three years (the maximum allowed by law—this is the most expensve option because you are paying interest on interest.”

Does that sound like the District 300 deal or what?

The third option is “CAB Debt Certificates where there are no payments until 02/01/2012 (no call features with pure cabs as it is too cost prohibitive).”

Listed fourth are “Convertible CAB Debt Certs which exist like CABS until they convert to current interest (regular Debt Certs) on 02/01/2011 (this gives you flexibility of CABS but also allows for a call feature so you could repay them earlier—slightly more expensive than straight CABS but way more flexible.”

His email continues,

Option 1 is clearly the least expensive s our comparison graphs show but it does not require available cash to pay the interest from the time of issuance and only gives you relief from principal payments the first five years.

The convertible option number 4 gives you CAB freedom from both principal and inters the first five years PLUS the flexibility of being able to pay them off early or refund them with another bond issue down the road.

Option 2 is the most expensive because of all that capitalized interest. If the goal is to avoid paying anything for the first five years, I would recommend options 3 and 4 with a preference on option 4 because of the call feature. We could do a call feature on option 3 but it would be so expensive that it wouldn’t be worth it as call features on CABS are not well received in the market.

Stratton also calculated “what each of these options would need from a tax standpoint to pay the debt.” He points out that MCC cannot levy a new tax for repayment.

How’s how did he end last summer’s email?

We look forward to working with MCC on this project! Talk to you soon.

And, there is a special note to MCC President Walt Packard:

Walt—I’m also working on some legislation for impact fees and have a meeting with Senator Althoff this week. Let me know if you are interested in talking with her some more about this. Mike Monaghan has invited me down to talk about this issue to the ICCTA (Illinois Community College Trustees Association) in September.

Stratton’s second email is dated October 5, 2006. Apparently Stratton has been tasked to contact bond counsel Chapman & Cutler to find out if the debt certificates could be used to reimburse the college for “any costs associated with the land purchase.

“If the College has any interest in adding those costs to the financing IRS regulations require the adoption of a resolution stating the intent…”

The resolution was attached.

Stratton says he will be in Crystal Lake Friday morning, “if you would like to meet Friday or any other time. Talk to you soon.”

Email number 3 talks about the impact fees, but the real purpose seems to be to tell Ron Ally that Stratton has “forwarded our new analysis to Todd and you the other day.”

The would-be bond advisor says, “…there may be a way we can get the costs down even further in the early years by shifting more of the principal to the long end of the deal if you need that.”

Then Stratton reveals that Chapman & Cutler believes “the deal will have to be done on a taxable basis” as “a result of the private use issues.” He suggests splitting the issue “into a taxable and tax exempt piece.”

Even the friendly salesman, Stratton concludes, “As always, call or email with questions. I would also be happy to come out and discuss any of this in person when the time is right. Hope all is well and talk to you soon!”

On April 26, 2007, Stratton sends MCC his firm’s Request for Proposal and cover letter.

In it is the following accurate statement:

More recently, Tim has done substantial work with McHenry County College on financial modeling for the land purchase and stadium financing.