Attorney General Options

Municipalities may consolidate bond funds and pool loans

MUNICIPALITIES, both home-rule and non-home-rule, may associate to create and utilize a consolidated municipal bond fund in a pool for loans to participating; municipalities. Any. Gen. Neil F. Hartigan delivered this opinion June 4 in response to an inquiry from Comptroller Roland W. Burns.

The proposed program as described in the opinion is "in its simplest terms, a cooperative venture by participating communities to 'purchase money' for the use of the participants. "lt is assumed that the size of the joint bond issue would lead to lower interest rates and reduced costs of issuance, compared to normal bond issues.

Participating home-rule communities would issue and sell revenue bonds, which would be limited obligations of the issuing communities. Proceeds would be lent to participating municipalities for projects that serve governmental functions. Proceeds from the loan agreements would be the sole support for the bonds. The size of the pool would be limited to amounts needed over a three-year period for the projects, plus costs of issuance and administration; any funds unused during the three years would be applied to redemption of the bonds.

The opinion points out: "It is clear that article VII, section 10 of the Constitution was intended to give units of local government broad powers to associate and contract together to obtain government services, to combine and transfer functions of government, and to use their credit and revenues to finance inter-governmental activities." The attorney general also relied on the Interegovernmental Cooperation Act (Ill. Rev. Sat. 1985. eh. 127. sec. 741 et seq.).

Non-home-rule municipalities do not have the same broad authority as home-rule municipalities to incur debt. The opinion says that they could participate in the venture but would have to "obtain approval and authorization sufficient to borrow or to authorize issuance of bonds individually." (See "Debt, taxes and home rule," Illinois Issues, December 1985, pp. 18-23.) (File 86-5)

August & September 1986/IlIinois Issues/63