IDFA Issues Infrastructure Bonds For Monmouth,
East Hazel Crest

Two Illinois municipalities will receive funding for infrastructure improvements under a bond program of the Illinois Development Finance Authority (IDFA).

The City of Monmouth in Warren County will receive $1.8 million of financing to improve local waste-water treatment facilities. The Village of East Hazel Crest in Cook County will receive $125,000 for construction of a water tank and other improvements to its municipal water system.

The local projects are possible because of the creation in 1984 of the "Infrastructure Bond Bank," and IDFA program that offers municipalities an alternative to the high costs often incurred through small-debt issues.

"The Infrastructure Bond Bank is another example of innovative state financing programs that help communities with specific needs," said Ronald Bean, IDFA executive director.

The tax-exempt infrastructure bonds issued by IDFA have received an "A" rating from Standard & Poor's.

Under the Infrastructure Bond Bank plan, IDFA bundles a number of small, local-debt issues into a larger, more attractive bond issue, which is sold in the national municipal bond market.

The program's bonds generate savings in two ways — lower interest rates and reduction of a portion of issuance expenses.

Once the IDFA bond sale is closed, communities must make semi-annual payments to IDFA, which the authority uses to repay its debt to program bond holders. The program bonds are issued by IDFA as a state authority, and the state is not responsible for repayment of the program bonds.

The program's bonds are secured through:

— Timely repayment of debt service by the participating units of government.

— An IDFA reserve fund created as a safeguard against default or delayed payment.

— A "tax-intercept" mechanism provided by the legislature that allows IDFA to request that the State Comptroller and Treasurer shift state-collected taxes to the program trustee to remedy default by a community. Such diversion of local sales and income taxes could be triggered only after a default by a participating unit of government.

Bean said the program has succeeded in its initial steps thanks to support from Gov. James R. Thompson and legislative leaders such as House Speaker Michael J. Madigan and Senate President Philip J. Rock.

"The backing of the Governor and General Assembly leaders has created an important funding tool for local officials whose communities often lack a bond rating," Bean said. "Borrowing costs for these communities can be prohibitive, especially because smaller debt issues are less attractive to the financial markets."

Eligible projects include public works activities such as improvements to roads, water and sewer systems, and public buildings. Also eligible are requests for land acquisition, construction of public buildings and other related municipal matters.

IDFA administers a number of financing programs that assist local government and businesses with projects that stimulate economic development and aid in the creation and retention of jobs. Other IDFA programs include a direct loan fund for small businesses, a venture capital fund for start-up businesses and tax-exempt industrial revenue bonds.

For more information about the Infrastructure Bond Bank program, call or write Susan L. Carlson (2 N. LaSalle St., Suite 780, Chicago, IL 60602, 312-793-5586) or Lee Roy Brandon (400 E. DeYoung, P.O. Box 397, Marion, IL 62959, 618-997-6318), •

June 1986 / Illinois Municipal Review / Page 21