Minutes - 05/01/1999 - Board of TrusteesI
VILLAGE OF OAK BROOK MINUTES OF
SPECIAL MEETING HELD ON MAY 1, 1999.
UNOFFICIAL UNTIL APPROVED AS WRITTEN
OR AS AMENDED BY VILLAGE BOARD ON
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1. MEETING CALL:
The Special Meeting was called to order by President Bushy at 1:07 p.m. in the Samuel
E. Dean Board Room of the Village Commons. The meeting was called pursuant to
Notice given by law, copy of which is attached.
2. ROLL CALL:
The Clerk called the roll with the following persons
PRESENT: President Bushy, Trustees Butler, McInerney and Savino.
ABSENT: Trustees Caleel and Kenny.
Trustee Craig arrived at 1:29 p.m.
IN ATTENDANCE: Stephen B. Veitch, Village Manager; Michael A. Crotty, Assistant
Village Manager; and Darrell J. Langlois, Finance Director/Treasurer.
3. PUBLIC INFORMATION MEETING ON THE PROPOSED SALE OF GENERAL
OBLIGATION ALTERNATE BONDS:
President Bushy indicated the purpose of this public information meeting is to provide
information on the proposal to sell general obligation alternate bonds in the amount of
$5,000,000 for the purpose of financing part of the cost of capital improvements in the
Village, including a new public library, municipal building improvements and the
improvement to the irrigation system at the Oak Brook Golf Club.
She explained that the Village operates primarily on sales tax revenue. With the
assistance of Senator Tom Walsh and the Illinois Retailers Association, legislation was
passed in Springfield which enables the Village Manager and Finance Director to review
payer - specific sales tax information for a better understanding of the Village's revenue
stream. The Village is concerned that sales tax revenue could diminish with Intemet
sales, as the sales tax goes directly to the State of Illinois and not the origin of purchase.
The Village Board has discussed this issue for several years and decided to pursue this
form of financing capital improvements.
Finance Director Langlois commented on the strong financial condition of Oak Brook,
and explained that significant capital projects have been planned in the next five (5) years
which would reduce the fourteen month cash balance of the Village to a four to six month
cash balance. Therefore, the Village is considering alternative financing of these projects.
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Finance Director Langlois presented the following information:
Current Financial Highlights
• Sales tax revenue of $10.9 million in 1998.
• Operating surplus in the General Corporate Fund of nearly $2.0 million in 1998 on total
revenues of $14.6 million and total expenditures of $12.6 million.
• 1998 ending cash balance of $15.7 million in the General Corporate Fund is equal to
nearly 14 months of 1999 operating expenditures.
• Per the 1999 -2003 Five -Year Financial Plan, $12.4 million of capital projects over the
period will reduce the ending cash balance in the General Corporate Fund to $6.8 million
in 2003.
• Ending cash balance in 2003 is projected to be equal to 5.2 months of operating
expenditures if all projects are completed with cash, within the Village Board's policy
target of a four to six month operating reserve.
Status of Major Projects in the 1999 -2003 Five -Year Financial Plan
• New Library Construction- approved and funded.
• Golf Club Clubhouse Expansion- approved and funded.
• Golf Club Irrigation System Replacement - approved, financing anticipated.
• Village Hall Expansion/Renovation, including new Fire Station #I-not yet approved by
Village Board, funded based on 1998 estimates.
• Bath and Tennis Clubhouse Expansion -not yet approved by Village Board, funding
contingent on compepsation from DuPage County for 31" Street right -of -way.
Why Finance Capital Projects?
• Maintains higher cash reserves in order to maintain essential Village services in the event
of a reduction in revenues. For Oak Brook, sales taxes are the primary source of revenue.
• Historically low interest rates - current ten year tax exempt rate approximately 4 %.
• Since most municipal financing is tax exempt, the interest earned on Village investments
is higher than the interest paid for borrowing (arbitrage).
• Allocates the cost of projects over time so that the users of facilities pay the cost of the
facilities.
Threats to Sales Tax Revenues
• Economic downturns.
• Electronic Commerce (Internet sales).
• Relocation of businesses in the office building sector, which contributes 30% of our sales
tax revenue, to other towns.
• Changes in State legislation.
• State mandated sales tax revenue sharing.
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THE MOST SIGNIFICANT REASON FOR CONSIDERING FINANCING CAPITAL
PROJECTS IS TO MAINTAIN HIGHER CASH RESERVES SHOULD THERE BE A
REDUCTION IN REVENUES.
Capital Proiects to be Financed with Bond Proceeds
• New Public Library.
• Village Municipal Building Expansion/Renovation.
• Golf Club Irrigation System - financing anticipated in the 1999 budget, considered as part
of the bond issue in order to obtain lowest interest cost. Would be funded from Sports
Core revenues.
Financing Alternatives
• General Obligation Bonds
• Revenue Bonds
• Alternate Revenue Source Bonds
General Obligation Bonds
• Full faith and credit of the Village is pledged for repayment of the bonds.
• Secured by a real estate tax levy on all property.
• Highest credit rating and lowest interest cost of financing alternatives.
• Since Oak Brook is a non -home rule community, referendum approval is needed.
Revenue Bonds
• Only a specific revenue source is pledged for repayment.
• Not a full faith and credit obligation of the Village.
• Deemed by the financial markets to be a lesser credit quality which results in higher
interest costs.
• Subject to "backdoor referendum" requirements if 10% of the registered voters sign a
petition.
Alternate Revenue Source Bonds
• Characteristics of both general obligation bonds and revenue bonds.
• Full faith and credit obligation of the Village.
• Specific revenue source is pledged for repayment.
• Real estate taxes are levied to provide additional security to bondholders, but would be
abated each year.
• Other available revenues are legally required to be used before real estate taxes could be
extended.
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• Due to the tax levy provision, interest would be paid at a rate near or equal to the general
obligation rate.
• Subject to "backdoor referendum" requirements.
"Backdoor Referendum"
• Period runs for thirty days from the publication of the ordinance authorizing the issuance
of the bonds.
• Voters can call the question of whether to issue bonds to a referendum at the next election
if 7.5% of the voters sign a petition.
• In Oak Brook, 448 signatures are required to call the question to referendum.
Protection for Taxpayers
• Statutes allow taxpayers to take action against the Village if sales tax revenues are
sufficient and not used to pay debt service.
• Authorizing ordinance states that any available funds will be used prior to extending real
estate taxes.
• Prior to extending real estate taxes, the Village has the flexibility to increase utility taxes
from 3% to 5% and to also tax long distance telephone service.
• Taxing long distance, and changing rates to maximum would yield an additional $2
million annually.
• Approximately 70% of utility taxes are paid by business taxpayers. This proportion
would increase if long distance service was included.
• Extending real estate taxes would be a last'resort.
What State in this Process is the Village Currentl in?
• Ordinance authorizing the issuance of up to $10 million of general obligation alternate
bonds has been adopted.
• Public hearing has been scheduled for May 11, 1999 to take public comment regarding
the Village's intentions to sell $5 million in bonds.
• If $5 million in bonds are sold, proceeds will be used to finance the new library and the
Golf Club irrigation system.
• At a later date the Village Board may decide to issue up to $5 million in bonds for
financing the municipal building project.
• A second public hearing would be required prior to the issuance of the second $5 million
in bonds.
Key Dates
• April 13, 1999 - ordinance authorizing issuance of $10 million in general obligation
alternate bonds is adopted by the Village Board.
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• April 23, 1999 -bond ordinance is published in the DAILY HERALD which starts the
thirty day "backdoor referendum" period.
• May 11, 1999 - public hearing is scheduled to receive public comment as to the Village's
intention to sell $5 million in bonds.
• May 24, 1999 - "backdoor referendum" period expires.
• May 25, 1999- decision by the Village Board as to whether to proceed with the issuance
of bonds.
Resident Constantine Xinos inquired if the Village monitored the large sales tax revenue
producers in Oak Brook to determine if they are pleased with residing in Oak Brook or if
they have any concerns. President Bushy indicated she meets with many tenants in the
commercial sector of Oak Brook to insure their needs are being met as corporate residents
in Oak Brook.
Trustee McInerney noted the Oak Brook Hotel, Convention and Visitors Committee has
worked diligently with advertising in proven markets of the amenities Oak Brook offers
people at the hotels, restaurants and shopping center. An increase in hotel occupancy has
occurred for which the Village receives Hotel and Motel tax revenue to generate further
advertisements for the hotels.
4. ADJOURNMENT:
Motion by Trustee McInerney, seconded by Trustee Butler, to adjourn the Special
Meeting at 2:24 p.m. VOICE VOTE: Motion carried.
ATTEST:
Linda K. Gonnella, CMC /AAE
Village Clerk
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VILLAGE OF OAK BROOK
1200 OAK BROOK ROAD
OAK BROOK, ILLINOIS 60523 -2255
PHONE: 630 990 -3000
FAX: 630 990-0876
.. W E B S I T E: www.oak- brook.org
NOTICE OF SPECIAL MEETINGS
Public Information Meetings
on the
Proposed Sale of General Obligation Alternate Bonds
May Is` and May 10th
NOTICE IS HEREBY GIVEN that a majority of the members of the Village Board of
Trustees Rf Y be present for two Public Information Meetings: on Saturday, May 1, 1999 at
1:00 p.m. and on Monday, May 10, 1999 at 7 :30 p:m. in the Samuel E. Dean Board Room of the
Village Hall, located at 1200 Oak Brook Road, Oak Brook Illinois.
The purpose of these meetings is to provide information on the proposal to sell general
obligation alternate bonds in the amount of $5,000,000 for the purpose of financing part of the
cost of capital improvements in the Village, including a new public library, municipal building
improvements and the improvement of the irrigation system at the Oak Brook Golf Club.
Village of Oak Brook
mr:hona issue 1999