This is a continuation of the minutes of the October 10, 2016, meeting of the Crystal Lake Civic Authority meeting.
The Raue Center from the Home State Bank parking lot.
The Raue Center is currently making payments in the amount of approximately $6,700 – $7,000 per month. Late charges are being assessed monthly (approximately $350 per month) and have accrued to $2,042.14 as of 9/19/2016, likely due to a misalignment of the monthly due date and payment date, showing that the payments are always a month late, even though the payments are being made monthly.
Mr. Lewis continued with the following information:
Overview of Municipal Bonds
Municipal Bonds are issued to provide funds to state and local governmental units to build public projects and infrastructure which represent a promise to repay investors an amount of money borrowed (principal) along with interest (“debt service”), according to a fixed schedule.
Typically, an investor receives tax-free interest payments so it offers to buy Municipal Bonds at a lower interest rate, which is what the CCA is seeking to do. Municipal Bonds usually mature between 1-30 years from issuance date (maximum 40 years per State statute).
Mr. Kost of Chapman and Cutler continued the presentation with the following information:
Poster from one of the many supporters of the Raue Center grant.
The Civic Center Authority (CCA) is a municipal corporation created by legislation which states that the CCA can only
- run,
- acquire,
- construct,
- own,
- maintain and
- operate the civic center (Raue Center),
and if there is not enough money to do that, it can be borrowed.
All actions of the CCA are subject to the Open Meetings Act.
The CCA can only borrow money for certain things and use certain procedures; meaning that it can only issue revenue bonds paid solely from
- fees,
- charges,
- rents and
- other revenues of the CCA.
If the revenues are not sufficient to pay the obligation, the CCA has no ability to take a lien or mortgage on the physical property.
As a legal hurdle, the CCA has to be able to show that
- rates,
- charges,
- rents
are sufficient to pay the
- debt,
- operate,
- maintain and
- repair the facility
through every year of the debt before the bond can be issued.
Tom Hayden asked for clarification regarding the Civic Center Authority’s ability to borrow money only through issuing bonds. Mr. Kost stated that was correct.
Mr. Hayden asked for an explanation of the difference between the CCA and the City in that regard.
Mr. Filippini stated that they were created under different statutes, and the CCA/City relationship was limited solely to the appointment of members to the CCA by the City, and otherwise, they were like two separate “towns”.
Mr. Lewis continued with the following information:
Proposed restructuring.
If the financed project meets the requirements of the tax-code, the Authority Bonds could be designated tax-exempt. The Bond Counsel, Chapman & Cutler, will need to do a thorough review of the loan documents to determine if all or a portion of the Authority Bonds issued to refinance the loan can be designated as tax-exempt.
A civic center authority is expressly prohibited from creating any mortgage or lien upon any physical property (70 ILCS 200/2-50.1).
A civic center authority may borrow money which borrowing is to be evidenced by the issuance of interest-bearing revenue bonds payable solely from the revenues or income of its authorized activities or funds received from other sources (70 ILCS 200/7-35, 2-50).
The revenues to pay the debt service on the Authority Bonds would come from the Corporation to the Authority pursuant to an amended lease agreement.
Home State Bank Proposed Refinancing Structure
- Principal amount of $2,260,000 (excluding the costs of issuance).
- Interest rate of 2.50%.
- Interest-only for the first three years.
- 30-year term with principal amortizing after three years.
- The proposed amortization schedule would include: Years 0-3: $0; Years 4-5: $50,000;Years 6-8: $75,000; Year 9: $87,000; Years 10-30: $88,000.
The debt service (principal and interest) will range from a low of $56,500 in the interest-only years to a high of $135,375 in 2025. A detailed debt service schedule covering a 30 year period as provided by Home State Bank was presented.
Why do I have the feeling that the taxpayers are about to be fleeced – again ?
More money going to the caymans?
Another example of government getting involved in the private sector.
There is ample evidence all around us of the difficulty in operating a performing arts center, even movie houses have been failing and being replaced by modern facilities.
Unless a sugar daddy surfaces the Raue will never be able to payoff it’s existing debt, no matter how badly our leaders want it to prosper.
And we wonder why our tax burden is so high.
The PowerPoint presentation and the debt service schedule presented by PMA Financial Advisors to the Crystal Lake Civic Center Authority Board can be obtained by submitting a Freedom of Information Act (FOIA) request to the Crystal Lake Civic Center Authority Board.
The City of Crystal Lake can in the name of transparency post these documents on their website, since the City is posting some documents on its website for the Crystal Lake Civic Center Authority Board meetings.
Better yet, the Civic Center Authority Board should in the name of transparency be sure that all documents such as board agendas, board agenda packets, board minutes, presentations, reports, audited annual financial statements, budgets, etc. are posted on a specific website.
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Refresher:
Authority = Crystal Lake Civic Center Authority (CCA), a unit of government, located at 100 West Municipal Complex, Crystal Lake (location of City of Crystal Lake government).
The Crystal Lake CCA is not part of or a subsidiary of the City of Crystal Lake, rather is a “Civic Center Authority” which is a specific unit of government in Illinois.
However, the City of Crystal Lake does appoint all board members to the Crystal Lake CCA.
Corporation = Raue Center for the Arts (RCFA), a 501(c)3 non-profit organization, located at 26 N Williams St, Crystal Lake.
Raue Center for the Arts performances are in building formerly known as the El Tovar Theatre located at 26 N Williams St, Crystal Lake.
The El Tovar was renamed to Raue in memory of an estate which provided a large gift to the Crystal Lake Civic Center Authority.
In 1998 the Crystal Lake CCA (lessor aka landlord) entered into a lease agreement with the Raue Center for the Arts (lessee aka tenant).
Also around that time the Crystal Lake CCA entered into an $8 million dollar loan agreement with the Home State Bank of Crystal Lake.
The Crystal Lake CCA did not have statutory authority to enter into a loan agreement, so at this time, the loan is illegal and there is no collateral for the loan.
But, the Crystal Lake CCA does have statutory authority to issue revenue bonds, so one of the current issues is a proposal to convert the loan agreement to revenue bonds.
Another current issue is a proposal to renegotiate the lease.
++++++++++++++++++++++++++++++++++
The pros and cons of having a Crystal Lake CCA should be made clear to the public.
The Crystal Lake CCA is a middleman between the bank and The Raue Center for the Arts.
The Crystal Lake CCA is not transparent.
They don’t have a website.
One has to perform web searches or FOIA documents to learn about the organization.
Even though it is a discrete unit of government from the City of Crystal Lake, any documents located via Google searches are found on the City of Crystal Lake website.
The government getting involved in the private sector…Hmmmm. Remember the rescue of the american auto industry? It saved more than a million jobs and took GM and Chrysler from bankruptcy. In the meantime, let’s follow the latest job of brave journalism by our sunshine blogger. After all, who needs arts? Tic, tock, tic, tock…
Ford didn’t need to be saved from bankruptcy and they got no government money.
Reward the losers.
GM and Chrysler were caught needing loans in a quickly developed negative credit environment.
No loans were being issued and good credit lines were being recalled at the time regardless of the repayment history or credit worthiness.
The only institution capable of furthering loans to the car industry was the Federal Government at that time(simplistically speaking).
Ford needed no such loan or guarantees at that time.
This was NOT a public/private cooperation inasmuch as creating a government entity to compete in the private market.
It was a natural extension of credit commonly issued and was paid back early to the American taxpayer with interest.
To equate the two situations is intellectually dishonest.
GM & Chrysler did not pay back all they were given by the Federal government.
They received money from several different Federal sources.
Here is a recent article.
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Balance
Auto Industry Bailout (GM, Chrysler, Ford)
by Kimberly Amadeo
April 25, 2017
http://www.thebalance.com/auto-industry-bailout-gm-ford-chrysler-3305670
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Ford did participate in a government program by the US Federal Reserve named the Term Asset Backed Securities Loan Facility (TALF) aka Term Assett Loan Facility.
Asset backed securities (ABS) is an important niche market for big players in the auto lending industry.
The assets in this case are car loans.
Compare it to mortgage backed securities.
When investors stopped purchasing mortgage backed securities, they also stopped purchasing asset backed securities.
The Federal Government’s solution was to lend money to institutional investors (up to 90% of the purchase price) to purchase TALF bonds from big lenders such as Ford Credit.
Furthermore, a government rule or assurance was the car loans would be highly rated (low default risk).
So the Federal loan didn’t go directly to Ford, but enabled Ford to more easily sell TALF bonds.
This is known as liquidity.
Ford would then use the bond proceeds for additional car loans, and the process repeats.j
The idea being if Ford Credit were to hold (service) the car loans themselves, they would have less capital less quickly to sell additional car loans, compared to selling a bundle of car loans for a lump sum.
I thought Chrysler (privately owned) filed bankruptcy during 09-10 and was able to write off over $1 billion of government funding?
Compassionate conservatism at its worst. Who needs facts? American tax payers rescued the banks (thank you Henry Paulson) and later the auto industry was rescued by a government loan which was later repaid in its entirety. This is a historical fact…unless you navigate the parallel universe of compassionate conservatism. Tic, tock, tic, tock…
Balance
Auto Industry Bailout (GM, Chrysler, Ford)
by Kimberly Amadeo
April 25, 2017
“The Treasury Department invested $80.7 billion from the $700 billion authorized by EESA.
It recouped all but $10.2 billion.”
Balance cited the source of that information as “Key Facts” from the US Treasury Department.
http://www.thebalance.com/auto-industry-bailout-gm-ford-chrysler-3305670
US Department of Treasury
Financial Stability in the Auto Industry
Path:
Home > Initiatives > Financial Stability > TARP Programs > TARP Programs > Auto Industry
Key Facts (There are 5 key facts listed)
1.
“The Automotive Industry Financing Program (AIFP) was created to prevent the collapse of the U.S. auto industry, which would have posed a significant risk to financial market stability, threatened the overall economy, and resulted in the loss of one million U.S. jobs.”
——————
2.
“In May 2011, Chrysler repaid its outstanding TARP loans six years ahead of schedule.
Chrysler returned more than $11.2 billion of $12.5 billion committed to Chrysler through principal repayments, interest, and cancelled commitments.
Treasury has fully exited its investment in Chrysler Group under TARP.”
————-
3.
“On December 9, 2013 Treasury fully exited its investment in General Motors (GM).
Treasury completed its fourth and final pre-arranged trading plan for the sale of its remaining 31.1 million shares.
Treasury recovered a total of $39.7 billion from its original investment of $51.0 billion in GM.”
——————–
4.
“On December 18, 2014, Treasury sold its remaining stake in Ally Financial.
In total, taxpayers recovered $19.6 billion on investment, roughly $2.4 billion more than the original $17.2 billion investment in Ally.”
—————
5.
“Treasury invested approximately $80 billion in the auto industry through its Automotive Industry Financing Program.
Following the sale of the remaining Ally stock on December 18, 2014, the program is now closed.”
http://www.treasury.gov/initiatives/financial-stability/TARP-Programs/automotive-programs/Pages/default.aspx
+++++++++++++++++++++++++
Summary:
Chrysler TARP Loans
Committed to Chrysler: $12.5 billion
Returned by Chrysler: $11.2 billion
Taxpayer Loss: $1.3 billion
——————-
Treasury Investment in General Motors
Treasury Invested: $51.0 billion
Treasury Recovered: $39.7 billion
Taxpayer Loss: $11.3 billion
——————-
Ally Financial (formerly GMAC aka GM financing)
Treasury Investment: $17.2 billion
Taxpayers Recovered: $19.6 billion
Taxpayer Gain: $2.4 billion
++++++++++++++++
Summary of the Summary:
$01.3 billion Taxpayer Loss in Chrysler TARP Loans
$11.3 billion Taxpayer Loss in Treasury Investment in General Motors
$02.4 billion Taxpayer Gain in Ally Financial
$10.2 billion total Taxpayer Loss
Next time tell the whole story Mr. Llavona.
“Let Detroit go bankrupt” (Mitt Romney). That is also part of the story. Did you thank a teacher today? Tic tock, tic, tock…
Government intervention in the private sector was necessary in 2008 to prevent the economic catastrophe that would result from the collapse of the United States’ auto industry. And still my compassionate conservative friends insist in worshipping unregulated businesses and markets. Long life to our sunshine blog! tic, tock, tic, tock…
Is the teacher Mr. Llavona going to correct the false information he was spreading and thank the blog commenter for explaining the loss to Mr. Llavona?
As explained above, the US Treasury Department website lists a $10.2 billion dollar loss to taxpayers attributable to the taxpayer bailout of General Motors and Chrysler.
Here is the teacher’s version of that story:
“Angel R. Llavona on 05/11/2017 at 10:47 pm said:
Compassionate conservatism at its worst.
Who needs facts?
American tax payers rescued the banks (thank you Henry Paulson) and later the auto industry was rescued by a government loan which was later repaid in its entirety.
This is a historical fact…unless you navigate the parallel universe of compassionate conservatism.
Tic, tock, tic, tock…”
Mark this commented is either a paid troll or incapable of rational comprehension.
Either way it is not productive to engage.
Thank you for the verification.
I knew taxpayers weren’t made whole this time.
Where were the warrants a La Iacocca Chrysler bailout 30 years ago?
He’s local agitator #2.
Moderate is local Agitator #1.
The Democrats have a nationwide network of agitators.
The agitation technique is explained in the Project Veritas series Rigging the Election found on YouTube.
The agitators have targeted Republican Illinois US Congressman Randy Hultgren big time, with a sit down in front of his office, after convincing him to do a town hall at which they of course agitated.
Tea party compassionate conservatives protesting in town hall meetings? American patriots. Americans concerned about losing their health care? Agitators. Welcome to the parallel universe of compassionate conservatism only available to you in our McHenry county sunshine blog. 2018, are you here yet? Tic, tock, tic, tock…
TARP and the Detroit bailout were profitable programs. The intention was to stabilize the economy and avoid an economic catastrophe, but in the end, it was profitable for taxpayers. This is a historical fact, unless you navigate the parallel universe of compassionate conservatism. 2018, are you here yet? Tic, tock, tic, tock…
The US Treasury website states the taxpayers lost $1.3 billion on Crysler TARP.
That is not profit.
That is loss.
+++++++++++++++++
The US Treasury website states what Mr. Llavona is apparently calling the “Detroit bailout” resulted in a $10.2 Billion taxpayer loss (Crysler TARP, GM Investment, Ally Financial).
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It’s debatable whether that loss was justified.
But it was a loss, and taxpayers lost $10.2 billion.
Go talk to the accounting teacher at Maine West High School in Des Plaines (Mr. Llavona earns $132,635 in “School Year 2016” as an English as a Second Language (ESL) ESL teacher at Maine South.
2016 is his 22nd year teaching.
He also receives 12 sick days per year, which he can accumulate up to 340 sick days, to cash out at retirement or exchange for years of service credit to retire early (there are 170 days in a TRS pension year).