McHenry County Blog

Thanks to the Northwest Herald for assigning Kevin Craver to cover the county board.

He writes today of the Finance Committee’s recommendation that the McHenry County Board vote to borrow $60 million on the Federal “come.”

All members voted to give themselves power to spend the $60 million.

Marc Munaretto is chairman of the Finance Committee, Lyn Orphal is vice chairman and the following are members:

Scott Breeden, John Hammerand, Tina Hill, Daniel P. Ryan, Mary Donner

Former McHenry County College Board member and bond counsel Tim Stratton told the committee that they is going to be “wide availability.”

President Barack Obama’s stimulus package is providing a stream of income (from borrowed billions need not be noted).

Guess the banks that got the billions still aren’t loaning to small business folks. I talked to a couple of CitiBank clients who had had their lines of credit cut, which would lead one to believe that the President’s plan is not working to these businessmen’s satisfaction.

First, McHenry County is going to become a “recovery zone.”

The county board just needs to pass a resolution.

The bonds will be highly taxed favored, won’t be counted against the county’s debt limit and, hey, we county taxpayers don’t have to worry if anyone defaults.

And, we Federal taxpayers, well, this is the year to switch your 401(k) retirement savings into a Roth IRA. (Of course, you’ll have to pay taxes on the money, but the tax rate has to be higher than it will be after the Democrats and President hike them to pay back the trillions they are borrowing.)

If you haven’t figured out I think this is a bad idea, you might want to read

The $60 million has to be out the door by the end of next year.

Although the Finance Committee will screen the public and business applicants, Munaretto said,

Maybe, but the committee surely sounds like the bankers who will make the decisions.

I hope they put in the contracts that no recipient, their officers or straw man or woman is allowed to make campaign contributions to themselves or anyone they hint could “use some help.”

The McHenry County Mental Health Board and the McHenry County Economic Development Corporation appeared in support of borrowing the money.

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Click to enlarge the 1934 Chicago Tribune cartoon.

Pioneer Press reporter Pete Gonigam has found a source, former McHenry County College board member Tim Stratton, now a “public financing attorney,” willing to point out that if the McHenry County minor leaguer baseball team tanks, McHenry County College will have to come up with the money to pay off the proposed debt certificates.

If the minor league baseball team doesn’t pan out, MCC would be obligated to pay them off with “all lawfully available funds,” Stratton said.

My source used the term “come hell or high water” to characterize the debt certificates. In other words, the borrowers could care less where the money came from. They would be paid regardless of the success of the team.

You can read what I found and published in May here.

Also of interest is that both MCC board members Scott Summers and Donna Kurtz told the Algonquin Countryside reporter that alternatives to debt certificates were not explained to the board by MCC President Walt Packard. Other forms of financing might have required a referendum, Stratton revealed.

= = = = =
McHenry County Board members Donna Kurtz and Scott Summers look left at MCC President Walt Packard.

Pioneer Press reporter Pete Gonigam has found a source, former McHenry County College board member Tim Stratton, now a “public financing attorney,” willing to point out that if the McHenry County minor leaguer baseball team tanks, McHenry County College will have to come up with the money to pay off the proposed debt certificates.

If the minor league baseball team doesn’t pan out, MCC would be obligated to pay them off with “all lawfully available funds,” Stratton said.

My source used the term “come hell or high water” to characterize the debt certificates. In other words, the borrowers could care less where the money came from. They would be paid regardless of the success of the team.

You can read what I found and published in May here.

Also of interest is that both MCC board members Scott Summers and Donna Kurtz told the Algonquin Countryside reporter that alternatives to debt certificates were not explained to the board by MCC President Walt Packard. Other forms of financing might have required a referendum, Stratton revealed.

= = = = =
McHenry County Board members Donna Kurtz and Scott Summers look left at MCC President Walt Packard.

* = * = * = * = * = *
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.

The day after the McHenry County College Board approved its no-bid deal with Equity One, Requests for Qualifications for bond adviser were due to be returned.

Replies were received from four “bond advisers.”

They are

• Crowe Chizek and Company LLC (Michael A. Clayton)
• Ehlers and Associates, Inc. (Steve H. Larson)
• Harris, (Eric Anderson)
• Hutchinson, Shockey, Erley and Co. (Timothy Stratton)

Crowe Chizek and Company recommends municipal bond insurance to enhance MCC’s credit rating.

Base fee for Crowe Chizek is $9,000 plus $1.50 per $1,000 of bonds issued. An additional fee of up to $2,500 would be charged if MCC wants to hire the firm for its annual continuing disclosure undertakings.”

Ehlers says its “Mr.Larson has served McHenry County College District No. 528 since 1988 as their independent financial advisor. In that role he has supervised 7 bond and debt issues totaling $34,660,000. Nearly all of these issues have been sold on a competitive bid bases where the College has received an average 8 bids…He also helped the College with financial planning that led to an operating rate increase.”

With regard to compensation, Ehlers states, “the method and amount of compensation is negotiable.” It points out that independent financial advisers are usually paid “on a percentage of the par amount of the bond issue subject to a minimum fee per issue.”

Tim Stratton, contact person for Hutchison, Schockley, Erley and Company, included the following sentence:

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

Stratton’s proposes a fee “in the range of $7.50 -$10 per thousand based on the par value of the bond issue.” Later, the proposal states, “However, for issues exceeding $20 million HSC will cap its fee at $8.50 a bond.” It points out that “the overall percentage is usually higher for a smaller issue and lower for a larger issue.”

Harris, represented by Eric Anderson, has this observation:

”At a proposed value of $26 million, this issuance would be the largest issuance on record for the College, and it Debt Certificates are used for the funding of the project, special care and analysis would need to be conducted in order to provide comfort that the debt service burden undertaken by the College would not cause stress on the College’s other operations.”

The Harris presentation has another interesting paragraph:

”Further, we understand that the considered project is part of a $140 million campus master expansion plan. We would initially surmise that this play would require referendum support, and would be pleased to provide the College with analysis showing the amount that could be self-funded (through debt certificates) and the impact that any referendum considered by the College would have on residents.”

Harris suggests “a percentage fee based approach, though we would be open to exploring other compensation alternatives should the College desire.”

The day after the McHenry County College Board approved its no-bid deal with Equity One, Requests for Qualifications for bond adviser were due to be returned.

Replies were received from four “bond advisers.”

They are

• Crowe Chizek and Company LLC (Michael A. Clayton)
• Ehlers and Associates, Inc. (Steve H. Larson)
• Harris, (Eric Anderson)
• Hutchinson, Shockey, Erley and Co. (Timothy Stratton)

Crowe Chizek and Company recommends municipal bond insurance to enhance MCC’s credit rating.

Base fee for Crowe Chizek is $9,000 plus $1.50 per $1,000 of bonds issued. An additional fee of up to $2,500 would be charged if MCC wants to hire the firm for its annual continuing disclosure undertakings.”

Ehlers says its “Mr.Larson has served McHenry County College District No. 528 since 1988 as their independent financial advisor. In that role he has supervised 7 bond and debt issues totaling $34,660,000. Nearly all of these issues have been sold on a competitive bid bases where the College has received an average 8 bids…He also helped the College with financial planning that led to an operating rate increase.”

With regard to compensation, Ehlers states, “the method and amount of compensation is negotiable.” It points out that independent financial advisers are usually paid “on a percentage of the par amount of the bond issue subject to a minimum fee per issue.”

Tim Stratton, contact person for Hutchison, Schockley, Erley and Company, included the following sentence:

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

Stratton’s proposes a fee “in the range of $7.50 -$10 per thousand based on the par value of the bond issue.” Later, the proposal states, “However, for issues exceeding $20 million HSC will cap its fee at $8.50 a bond.” It points out that “the overall percentage is usually higher for a smaller issue and lower for a larger issue.”

Harris, represented by Eric Anderson, has this observation:

”At a proposed value of $26 million, this issuance would be the largest issuance on record for the College, and it Debt Certificates are used for the funding of the project, special care and analysis would need to be conducted in order to provide comfort that the debt service burden undertaken by the College would not cause stress on the College’s other operations.”

The Harris presentation has another interesting paragraph:

”Further, we understand that the considered project is part of a $140 million campus master expansion plan. We would initially surmise that this play would require referendum support, and would be pleased to provide the College with analysis showing the amount that could be self-funded (through debt certificates) and the impact that any referendum considered by the College would have on residents.”

Harris suggests “a percentage fee based approach, though we would be open to exploring other compensation alternatives should the College desire.”