LOCAL GOVERNMENTS
FINANCE PUBLIC IMPROVEMENTS

Local governments in Illinois have found a friend in the Illinois Rural Bond Bank - a small state agency with big private sector resources that issues tax-exempt bonds on behalf of communities throughout the state. Last month, three villages and one fire protection district participated in a $2.4 million bond issue, borrowing from $380,000 to $850,000 over six to twenty-five years and sharing the upfront financing costs. Interest rates ranged from 4.15% to 6.25%.

With populations of less than 1,000 people and loan amounts of less than $500,000, the Villages of Elwood, New Berlin and Sheffield benefited by using the Bond Bank's investment-grade credit rating and from pooling their smaller financing needs into one larger bond issue. These local governments would have paid approximately 4.60% to 6.70% if they went to the bond market individually on their own behalf. Local governments of similar size and with similar borrowing needs would have fared about the same.

The Villages of New Berlin and Sheffield borrowed through the Bond Bank to fund their local shares of Community Development Assistance Program (CDAP) grants from the Department of Commerce and Community Affairs. New Berlin borrowed $450,000 over twenty years to help finance $767,000 of improvements to the Village's water distribution system, including repairs to an existing elevated tank backwash sludge pits, permanent dam and rip rap and water main extensions.

Working on a $750,000 project, Sheffield borrowed $380,000 over twenty-five years to help finance the construction of a new water well and elevated storage tank and the installation of water mains to connect the new well. "The Bond Bank filled a need for the Village of Sheffield to leverage their local share of the CDAP grant they received," said Kevin Lindeman of the North Central Illinois Council of Governments.

The Village of Elwood borrowed $490,000 over twenty years to finance the construction of a new water well and masonry well house and the purchase of related equipment.

The Lake Villa Fire Protection District borrowed funds for the purchase of a new fire truck and two ambulances. With an estimated population of 27,000 and a substantial and growing tax base, the Lake Villa Fire Protection District could easily secure favorable rates in the market on its own. Because of the relatively small loan amount of $850,000 and a short term of six years, however, the District found that it was more economical to participate in a pooled financing by avoiding the New York rating agency fees and sharing the upfront costs of issuance with other pool participants. The District was also facing a tight timetable. By participating in the Bond Bank's established pooled bond program, the entire financing was completed within four weeks.

Lieutenant Governor Bob Kustra chairs the Illinois Rural Bond Bank which is committed to providing low-cost capital to small and growing communities throughout the state for infrastructure and other public improvement projects. Since it first began operations in 1990, the Bond Bank has provided over $53 million in capital to 104 local governments.

Applications are now being accepted - without cost or obligation - for the next pooled bond issue, scheduled for December 1996. For further information and financial assistance, please call Tim Bobinsky, Charles Hammond or Darla Gebhart at the Bond Bank office at 217-524-2663 or the Bond Bank's collar county representative, Dick Welton, at 847-623-7650.

July 1996 / Illinois Municipal Review / Page 25