A bill that was passed unanimously by both houses of the Illinois state legislature last month will make it easier for voters to have a say before municipalities can sell a specialized type of bond, called a “backdoor referendum,” should Illinois Governor Pat Quinn sign the bill as expected.
The bill applies to what are known as alternate revenue bonds. These are bonds that a backed by a specific revenue stream, but also are backed up by property tax revenue.
The legislation makes it easier to force a so called “backdoor referendum.” The bill reduces the number of petition signatures that need to be gathered to force a referendum on whether to issue alternate revenue bonds referendum from 7.5 percent of registered voters in a community to the lessor of five percent of registered voters or 5,000. The bill also lengthens the period of time allowed to gather those signatures to 45 days from the current 30 days. The bill also prohibits firms that advise municipalities of the feasibility of paying off such bonds from being otherwise involved in the project that the bonds would finance.
“It’s somewhat of a hybrid which is payable from the revenue that is generated from the project, but if that enterprise revenue that is insufficient to pay the debt service on that bond then the full faith and credit of the public body will kick in,” said Brian Day, the lead staff attorney for the Illinois Municipal League.
“I saw abuses in the issuance of alternate revenue bonds,” said State Representative David McSweeney (R-Barrington Hills), the prime sponsor of the bill. “We saw an example up in Lakewood in which (the purchase of) a golf club was financed with alternate revenue bonds. It didn’t work out and property taxpayers were stuck with the bills. I want to make sure it’s easier for taxpayers to stop potentially bad projects.”
The bill does not apply to alternate revenue bonds that finance or refinance projects for public utilities, streets, or public safety so that the impact of the bill is expected to be limited.
Tim Gillian, the Village Administrator of Forest Park, said that the bill wouldn’t likely impact Forest Park, but as a general matter he wished the General Assembly would stay out of municipal government.
“In general I would tell you that it’s distressing that the legislature is further hindering the non-home municipalities’ ability to manage themselves,” Gillian said. “They already do it to us in so many other ways… Anything else that further restricts us makes it more difficult. There’s other fish in the sea that they should be working on rather than continuing to strip away the abilities of local municipalities to manage themselves.”
But Gillian said that the bill probably would not affect Forest Park in the near future.
“It probably won’t impact us much because I don’t have any bond issues that I’m contemplating,” Gillian said.
The bill originally had a wider scope and also required proof of excess revenue to pay off the bonds. But that provision was dropped and made the final bill uncontroversial.
“It gives the people a greater opportunity to voice their opinion and that’s a good thing,” said State Senator Steven Landek, (D-Bridgeview), who also serves as the mayor of Bridgeview. “It’s a little greater democracy. It maybe makes it a little harder on a municipality sometime if they think a project’s good and maybe some people are objecting to it. Of course there will be conflicts. Overall I voted for the bill and I thought it was a good, solid bill,” Landek said.
“Local governments will just have to make the case a little stronger to the residents so they understand it. A little more democracy for the people which is fine,” he added.
Bridgeview, as a home rule community, generally does not have to issue alternate revenue bonds. But it has had to raise property taxes to pay for the construction of Toyota Park, the stadium for the Chicago Fire soccer team.
State Senator Don Harmon (D-Oak Park) also supported the bill.
“It will make it easier for residents to object to a certain category of bond issues which are driven more by the operational revenues of a government related enterprise than they would if they were objecting to a more traditional bond issue,” Harmon said. “If any municipality would like to finance a project relying on enterprise revenues this bill will give the voters a greater voice in that decision.”
