At the June 25 City Council meeting aldermen unanimously approved an amendment to the City’s budget policy that increased the City’s debt limit by $37 million – from $113 million to $150 million.
That additional $37 million will allow the City to issue $85 million in bonds over the next few months, to be used predominately for capital projects, such as construction of the new Robert Crown Center, renovations to the Evanston Public Library and improvements on Howard Street.
Aldermen also approved for introduction four separate bond ordinances – for $50 million, $20 million, $10 million and $5 million. Introducing an ordinance allows Council members to comment on it.
City Manager Wally Bobkiewicz read a statement by Ninth Ward Alderman Cicely Fleming, who was absent from the meeting. The statement said in part, “Increasing our debt limits puts us at risk for decreased credit rating, potentially paying higher interest rates, and the ability to borrow less money in the future. It is my goal that we would look to thoroughly examine a pay-as-you-go capital improvement plan, consider liquidating City assets (like the Recycling Center), and imposing spending restrictions.”
Mayor Stephen Hagerty said he wished to second Ald. Fleming’s comment that to increase the debt limit by $13 million “we need to have a financial plan. Each million dollars of debt costs $70,000. … Council has to cut expenses and find a funding source.” He added he thinks the property taxes in Evanston are high. “We have to have a plan. I don’t think we can just slap it on property taxes. … If we had a dedicated revenue source, I’d feel more confident.”
Alderman Ann Rainey, 8th Ward, said, ‘My feeling about this is nobody wants more debt. … Have we talked to our bond counsel?”
Shannon Jacobson from PFM Financial Advisors, the City’s financial adviser, and Sharone Levy from Chapman Cutler, the City’s bond counsel, attended the meeting.
Ms. Jacobson said, “You never know how taking on additional debt will impact your rating. The rating agencies, Fitch and Moody’s cite the pension liability and, obviously, reserves and liquidity.” She said the City has taken steps that indicate prudent financial management, such as putting more than is actuarially required into the police and firefighters pensions fund for the past several years.
“I would be surprised if your rating suffered from issuing the bonds,” Ms. Jacobson said. “I think your Aa+ and Aa2 ratings by Fitch and Moody’s, respectively, will hold, but, you know, crazier things have happened, but we don’t expect that to be the case.”
In a report dated Sept. 7, 2017, Foster & Foster, the City’s actuaries, estimated the City’s unfunded liability for the police and firefighters pension funds to be $204.5 million.
The final vote on the ordinances is expected at the July 9 City Council meeting. The bond sale is tentatively scheduled for late July or early August.
Proceeds from three of the four proposed bond issues are targeted for specific uses: The $50 million bond issue is for funds to build the new Robert Crown Center; the $20 million is for capital improvements; the $10 million for refunding purposes; and the $5 million for redevelopment projects.
It is not clear how the City will cover debt services on these bonds. The ordinance authorizing the bond issue provides “for the levy and collection of a direct annual tax for the payment of the principal of and interest on said bonds.”
The Crown Project - $50 Million
The City plans to issue the bonds for the Crown project in two parts: $25 million in 2018 and up to $25 million in 2019. The amount of the 2019 bond issue depends on how much additional money the nonprofit Friends of Robert Crown Center raises, so the amount could be less than $25 million. The project entails building the new community center with an ice complex, a library branch and several turf-covered athletic fields.
The memo from Chief Financial Officer Hitesh Desai and Budget and Finance Manager Ashley King that accompanied the bond ordinance said the debt service for the $50 million bond issue “will be paid out from the various sources including funds raised by Friends of Robert Crown and a variety of existing or new revenue sources including the tax levy.” Some Council members, however, have said they do not wish to raise taxes to pay for the Crown Center.
Capital Improvements - $20 Million
Proceeds from the $20 million bond issue will go toward general capital projects such as street resurfacing, improvements to the main library and construction of the branch library in the Crown project and infrastructure projects such as water main and sewer replacements in the Water Fund.
The memo from Mr. Desai and Ms. King states the debt service for the bonds “will be paid out of the future corporate purpose tax levy as well as the Water Fund.”
Refunding - $10 Million
The refunding bonds are essentially a refinancing of existing bonds, replacing $1.5 million and $8 million, respectively, of bonds issued in 2008. The bond memo said the City has already levied for the Dec. 1 payment on these bonds.
The City projects a savings of more than $900,000 over the life of these bonds.
Taxable Bonds for Redevelopment - $5 Million
Proceeds from the $5 million of taxable bonds for redevelopment will help finance two main construction projects in the Howard-Ridge tax-increment financing (TIF) district: the Howard Street Theater Project, with an estimated cost of $1.5 million, and a mixed-use development at 130 Chicago Ave., toward which the City has committed $2 million.
Future tax increments from that TIF will pay for this bond issue, according to the memo from Mr. Desai and Ms. King. The memo also said the final amount of bonds issued may vary, based on the actual bid responses.
Just before the June 25 City Council meeting, the City held a TEFRA – Tax Equity and Financial Responsibility Act – hearing on the proposed $50 million bond issue to finance the new Robert Crown center.
Notice of the meeting had been published in the Chicago Tribune.
Mayor Stephen Hagerty read a statement from Ninth Ward Alderman Cicely Fleming, who did not attend the meeting. Her statement read in part, “Given the ongoing financial decline of our State budget, the constant calls for financial assistance from my constituents, and our City’s looming budget deficit, I have many concerns over the request to bond $50 million for Crown. While I understand the need to renovate Crown (and many other City facilities) and applaud the great efforts to subsidize the cost by Friends of Crown, it would be my preference that we make more efforts to raise revenue prior to bonding.”
Alderman Peter Braithwaite, 2nd Ward, thanked Pete Giangreco, who heads the nonprofit Friends of Robert Crown Center that has raised more than $10 million for the new center. He also said, “Last year, this was a $30 million project. How did you get there – from $30 million to $50 million?” He also asked what the operating expenses for the new center are estimated to be.
Assistant City Manager Erika Storlie said, “The process from seven years ago to today has seen iterations of many ideas.” She said City staff would prepare a memo for the July 9 City Council meeting that detailed the increases in costs. “With the library [branch], two sheets of ice and three turf fields – at any time we could have changed it. Now we have many donors who are giving because of what the project is.
Lawrence Hemingway, Director of Parks, Recreation and Community Service, said the building’s many rooms and athletic areas will generate more revenue than the current building does.
Alderman Don Wilson, 4th Ward, said the Crown project has entailed “an extraordinary amount of work. We needed contributions from the community to do it the way the community would expect. … It’s an expensive project, and the cost is not to be taken lightly.” He added the maintenance fund for the building will “protect the donors and protect the asset.”
“We’re doing it right this time,” said Alderman Judy Fiske, 1st Ward. “I’m totally in support of this building. I’m in awe of the fundraising.”
During public comment, Ray Friedman said, “I’d like to express my opposition to the $50 million. That would pay for 200 single-family homes.”
Priscilla Giles said, “What’s been on the table much longer [than the Crown center] is housing. Both the Crown expenses and the high-rise buyouts could solve the housing problem.”
Mr. Giangreco said of the current Crown Center, “We have just about loved this building to death. The Friends of the Robert Crown Center raised $10 million and will raise $5 million more – we’re at $11.4 million.”