LOCAL GOVERNMENTS
FINANCE PUBLIC IMPROVEMENTS
Local governments in Illinois have found a friend in
the Illinois Rural Bond Bank - a small state agency
with big private sector resources that issues tax-exempt
bonds on behalf of communities throughout the state.
Last month, three villages and one fire protection district participated in a $2.4 million bond issue, borrowing from $380,000 to $850,000 over six to twenty-five
years and sharing the upfront financing costs. Interest
rates ranged from 4.15% to 6.25%.
With populations of less than 1,000 people and loan
amounts of less than $500,000, the Villages of Elwood,
New Berlin and Sheffield benefited by using the Bond
Bank's investment-grade credit rating and from pooling their smaller financing needs into one larger bond
issue. These local governments would have paid approximately 4.60% to 6.70% if they went to the bond
market individually on their own behalf. Local governments of similar size and with similar borrowing
needs would have fared about the same.
The Villages of New Berlin and Sheffield borrowed
through the Bond Bank to fund their local shares of
Community Development Assistance Program
(CDAP) grants from the Department of Commerce
and Community Affairs. New Berlin borrowed
$450,000 over twenty years to help finance $767,000 of
improvements to the Village's water distribution system, including repairs to an existing elevated tank
backwash sludge pits, permanent dam and rip rap and
water main extensions.
Working on a $750,000 project, Sheffield borrowed
$380,000 over twenty-five years to help finance the
construction of a new water well and elevated storage
tank and the installation of water mains to connect the
new well. "The Bond Bank filled a need for the Village
of Sheffield to leverage their local share of the CDAP
grant they received," said Kevin Lindeman of the
North Central Illinois Council of Governments.
The Village of Elwood borrowed $490,000 over
twenty years to finance the construction of a new water well and masonry well house and the purchase of
related equipment.
The Lake Villa Fire Protection District borrowed
funds for the purchase of a new fire truck and two ambulances. With an estimated population of 27,000 and
a substantial and growing tax base, the Lake Villa Fire
Protection District could easily secure favorable rates
in the market on its own. Because of the relatively
small loan amount of $850,000 and a short term of six
years, however, the District found that it was more economical to participate in a pooled financing by avoiding the New York rating agency fees and sharing the
upfront costs of issuance with other pool participants.
The District was also facing a tight timetable. By participating in the Bond Bank's established pooled bond
program, the entire financing was completed within
four weeks.
Lieutenant Governor Bob Kustra chairs the Illinois
Rural Bond Bank which is committed to providing
low-cost capital to small and growing communities
throughout the state for infrastructure and other public
improvement projects. Since it first began operations
in 1990, the Bond Bank has provided over $53 million
in capital to 104 local governments.
Applications are now being accepted - without cost
or obligation - for the next pooled bond issue, scheduled for December 1996. For further information and
financial assistance, please call Tim Bobinsky, Charles
Hammond or Darla Gebhart at the Bond Bank office
at 217-524-2663 or the Bond Bank's collar county representative, Dick Welton, at 847-623-7650.
July 1996 / Illinois Municipal Review / Page 25