The village council unanimously approved issuance of general obligation bonds, not to exceed $10 million during the May 23 council meeting. The bonds were issued following last November’s referendum in which residents approved an increase of one half of a percent on the sales tax, with the money earmarked for infrastructure improvements throughout the village.
“This all was one of the largest reasons the half of a percent tax was sought after,” said Mayor Anthony Calderone. “The referendum took place in November and when it was decided by the village council on a 5-0 vote, I believe, to move forward with the referendum. It was marketed to the public that this non-home rule sales tax revenue would be specifically earmarked for public infrastructure work.”
The money, he said, is needed because, otherwise, the village would not be able to finance the street improvements it needs.
“Absent the referendum we would be hard pressed to even do a half of a block per year,” Calderone said. “We just don’t have the money to do these streets. This is a very good public use.”
In fact, the revenue source used to repay the bonds, said Village Administrator Michael Sturino, will come mostly from setting aside the proceeds of the increased sales tax revenue.
“We are committing to spend about 75 percent of that, to be on the more conservative side, as an additional cushion over the life of the bond,” Sturino said.
For Calderone, the bonds represent a valuable and efficient way of getting the money for the improvements. The revenue source added by the tax increase will help sell the bonds to investors.
“The real value in a community responsibly going out to the market and selling bonds is that if you have a predictable revenue stream to retire the debt, you can get a lot bigger bang for your buck,” he said. “We think conservatively [the money from the sales tax increase] should represent close to a $1 million a year for the village in revenues and pretty much all that will be earmarked for debt retirement. It is a win, win for everyone.”
The bonds are being issued to finance what is being characterized as “necessary” infrastructure improvements for the village.
“The need is to replace some very old and aging streets and alleys,” Calderone said.
He said the projects will be completed beginning with the most necessary repairs and moving down the list, but, as street improvements are costly, not all streets will be redone.
“There have been a couple of evaluations done by our village engineer to establish an alphabetical grade to the conditions of our streets and alleys and from an engineering aspect,” said Calderone. “That [list] is utilized as a guide so we are aware of the physical condition of our streets and alleys. Streets are very expensive. It is a lot of money but it costs a lot of money to do these types of public works projects. In the grand scheme $10 million in public works is not a lot of money. We are not doing every street in town; we are starting with those that are in the worst shape first.”
The money from the sales tax increase could have been used for a variety of projects, Calderone said, but they were promised and earmarked for these needed improvements.
“That revenue could have been used for a variety of reasons. One of those could have been a reduction in property taxes, but it ended up being the consensus of the council that it will be earmarked towards public infrastructure improvements,” he said.
According to the ordinance, the funds would go directly towards “site preparation and/or demolition, relocation of utility delivery systems, construction or reconstruction of roads, alleys, sidewalks, water delivery systems, sanitary sewer systems, storm drainage systems, street lighting, traffic and public safety improvements and the acquisition of certain capital goods and or rights in land.”
The estimated costs for these upcoming projects include engineering, legal, financial, bond interest, bond discount, printing and publication costs, capitalized interest, municipal bond insurance, among others.
The council published the authorizing ordinance for the bonds on April 6 in the REVIEW advising residents they had 30 days to obtain a signed petition to stop the issuance and request the matter go to referendum.
No such petition was forthcoming, thus the bonds went before the council, which approved the issuance.
The bonds will be marked as General Obligation Bonds, Series 2005, in the denomination of $5,000 each. They will mature no later than January 1, 2026 and their interest rate shall not exceed 6 percent.
The bonds are expected to go to the market in June.