Are you getting tired of hearing, "Don't raise my taxes?"

Are you aware that there is one tax available to all park districts and forest preserve districts that can eventually lower your need to levy for some of your insurance needs?

The tax is levied for debt service on a financial alternative called the "General Obligation Insurance Reserve Bond." The financing must be based on sound insurance reserve needs.

This bond issue does not have the same effect on your debt limit as standard general obligation bonds. In counties that are not affected by the tax cap, it is allowed for over and above your limit without referendum. Additionally, the bond proceeds and the interest earned may be used to reduce or eliminate your annual levy for insurance. If you have interest earnings left over which are not required for the insurance purposes for which the bonds were issued and which are properly declared "surplus," you are permitted to use these surplus interest earnings in other ways as the debt is retired. However, you must structure the bond to avoid excessive surplus, for this would be in violation of the intent of the bond. Starting with the first year you pay off principal on the bonds, any surplus interest earned may go to reduce your non- insurance or general corporate levy, if desired.

The sole purpose of the bond is to develop a self-insurance reserve and to help you keep up with increasing insurance costs without increasing your insurance levy. Additionally, while you are paying off the bond, you may levy for the cost of your insurance if you do not wish to invade the principal proceeds of the insurance reserve fund.

In 1992, the Byron Forest Preserve District issued this type of bond with the assistance of Mrs. Jane Spirgel of Bane One in Chicago and Attorney Dan Bacastow of Chapman and Cutler. They guided the district through the proper steps. The only outside investment required was an independent evaluation by a qualified insurance actuary. This firm determined the appropriate level of funding for the district's self-insurance coverage. In the case of the Byron District, a four million dollar reserve was deemed to be a proper amount and not excessive.

The Byron Forest Preserve District's tax base is decreasing by approximately 2.8% per year. More than 90% of the district's property tax comes from the Commonwealth Edison Nuclear Plant that will function for approximately 3 5 years. Each year, the plan has depreciated. This has caused the district's assessed valuation to decrease. If excess interest income from the insurance reserve bond proceeds exceeds this amount, the district will not need to worry about meeting the needs of the district with diminishing tax dollars.

Warranted, the Byron District has an advantage. It can pass much of the cost of this bond on to its primary tax payer and do it in a relatively short time. However, any district can set up this type of fund. Even if it takes longer to pay down and the amount of the bond is less, it can be one of the major ways to take control of insurance costs.

If the level of the bond is well thought out and the community is totally advised of the future effect this could have on lowering insurance taxes, they will most likely support your decision.

It is the goal of the Byron Forest Preserve District to dedicate the interest earnings not needed for insurance purposes to the relief of future tax increases. The district plans to initially permit the reserve to continue some additional growth. This will ensure its ability to sustain the increases in the cost of living that we seem to experience annually in this area.

About the Author
Jack F. Philbrick, CLP, is the Director of the Byron Forest Preserve District.

Editor's Note
If you are interested in more information about this program, please contact the Byron Forest Preserve District, 7993 North River Road, Byron. IL 61010. (815) 234-8535.

Illinois Parks and Recreation 17 November/December 1993