By Ron Bluemer
For the NewsTribune
WENONA — Major reductions in property values are resulting in consideration of a half-million-dollar bond issue for the city.
Peru attorney Herbert Klein and Gwen Crawford, vice president of Economic Development Group Ltd., laid out the economic problem facing the city Monday night.
Klein cited a decline in Tax Increment Financing district funds by 33 percent.
Crawford explained the decline in revenues as a result of drawing down $869,000 in the last three years.
Only $80,000 was left in the TIF funds, she said.
“Everything has come down in the last four years,” she said.
“Your group probably didn’t anticipate this,” she added.
Interfund transfers were used to help the TIF fund.
As a solution, Klein and Crawford suggested issuance of a general obligation taxable bond for an estimated 4 percent interest for no more than $525,000. About $506,000 would be put back into the TIF fund.
Payments on the bond issue would be about $60,000 each year based on a 10-year issue.
That figure could be adjusted to a 15 or 20-year repayment figure reducing the annual payments.
“It just depends on how much you want,” Crawford said.
By the end of the current TIF, there would still be $9,000 remaining in that fund.
Crawford explained the drain on the TIF fund was due to about $500,000 of spending on such items as as the water storage building, the sanitary sewer project and the lift station.
Money could be taken from the water and sewer fund, which is sufficient to make bond payments.
“About half a million is all you need to get over this hump,” Klein said.
TIF extension difficult
Klein said the TIF expires in four years.
The option of an extension of the TIF for up to 12 years would require legislation to be passed in Springfield, and the bill to be signed by the governor, according to Klein.
Springfield won’t support this concept unless all taxing bodies will support an extension, the attorney said.
When Klein and alderman Russ Skaggs recently met with Fieldcrest school district representatives, there were a lot of unknowns from the district’s perspective.
If the district equalized assessed valuation increases, there is less state aid, according to Klein. However, if the EAV in the TIF district increases, there is no decline in state aid.
To make the decision to extend the life of the TIF more acceptable to the school district, Klein said he proposed declaring up to 50 percent of TIF funds as a surplus. That money could be transferred back to the county, which in turn would distribute the surplus among all the taxing bodies.
That suggestion was more favorable to the school district.
If carried out as they explained it, the school district would receive about $3,000 more, and the money would come in November instead of later in the school year.
“At 50 percent, they’re getting a little more than in the TIF,” said Skaggs.
“We have a long way to go to deal with all the taxing bodies,” Klein cautioned the city council.
“You’re not issuing any bonds tonight; we’re just getting the ball rolling,” Klein advised the aldermen.
The subsequent ordinance passed by the city council authorized the legal work to begin and consultation with underwriters to determine the interest rate and the amount of the bond issue, which would not exceed $525,000.
A public hearing also would be required followed by a 30-day period before an ordinance could be passed authorizing the issuance of the bond.