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Minutes - 05/10/1999 - Board of TrusteesF VILLAGE OF OAK BROOK MINUTES OF SPECIAL MEETING HELD ON MAY 10, 1999. UNOFFICIAL UNTIL APPROVED AS WRITTEN X OR AS AMENDED BY VILLAGE BOARD ON MAY 25, 1999 MEETING CALL: The Special Meeting was called to order by President Bushy at 7:31 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 and Trustee Caleel. Trustee Savino arrived at 7:35 p.m. ABSENT: Trustees Butler, Craig, Kenny and McInerney. 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. Residents interested in touring the fire station or police station may contact the Village Manager to understand why the Village wishes to remodel these facilities. 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. Finance Director Langlois presented the following information: Current Financial Highlihts • Sales tax revenue of $10.9 million in 1998. VILLAGE OF OAK BROOK Page 1 of 7 May 10, 1999 SPECIAL MEETING Minutes • 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 Maior Proiects 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 fl-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 compensation from DuPage County for 31" Street right -of -way. Why Finance Capita_ 1 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. Village Manager Veitch explained that the methods of distribution for sales tax revenue is decided by the State of Illinois legislature, and the Village is concerned about preserving our revenue stream. VILLAGE OF OAK BROOK Page 2 of 7 May 10, 1999 SPECIAL MEETING Minutes 1 President Bushy indicated that the Metropolis 2020 plan being supported by the Commercial Club of Chicago contains a recommendation where the Village would share our sales tax revenue base with other low sales tax based communities. The Village could lose 40% of its sales tax revenue. President Bushy acknowledged former Trustee Joseph Rush who helped develop the commercial /corporate base of our community. She explained that Village services are supported by our sales tax revenue. She noted that the Village already shares its tax revenue, as the property tax revenue north of 22nd Street, including the shopping center, goes to Villa Park, Oakbrook Terrace and Elmhurst schools. Legislation that could drastically affect our sales tax revenue is frequently introduced in Springfield. With the added support of Metropolis 2020 and the Commercial Club members, we need to be continually aware and on guard. 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. VILLAGE OF OAK BROOK Page 3 of 7 May 10, 1999 SPECIAL MEETING Minutes • 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. • 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. Constantine Xinos, 149 Briarwood North, asked what is the priority of repaying the debt or the interest as opposed to operating the Village. Village Manager Veitch indicated that the bond holders would be repaid first with sales tax revenues and secondly, the Village would be obligated to use any other available funds that were not then appropriated for other purposes, which would include invested cash reserves. Village Manager Veitch also stated that the bond holders would be paid twice annually. VILLAGE OF OAK BROOK Page 4 of 7 May 10, 1999 SPECIAL MEETING Minutes I . -e" � What Staize in this Process is the Village Currentlyin? • 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 intention 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. • 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. A resident inquired as to why the fire station and police station are third on the list. President Bushy explained that the Library has been proposed for approximately ten (10) years, and the American with Disabilities Act (ADA) requires that our Public Library be brought up to compliance with its guidelines or it would have to be closed. Our fire and police stations have grown over the last few years, and they now need to be addressed. Meeting their funding needs has been difficult. It is hoped that preliminary action will be addressed within the next ninety (90) days to the Village Board. A resident asked why the Village is expanding the Oak Brook Bath and Tennis Club. President Bushy commented that the residents voted to purchase it as part of the referendum to purchase the Sports Core property. The original concept was that the funds paid to purchase the property include the addition of another nine (9) holes with improvements. The golf course would be the revenue source for the Sports Core facilities. In prior years, members of the Bath and Tennis Club incurred the costs of maintenance of that facility and anyone else using that facility. Now the Village incurs the cost of maintenance of the property including pathway, road and tree maintenance for the entire Sports Core property. User fees are waived and the Village incurs the cost when our local organizations use the Bath and Tennis Club. Revenues have increased VILLAGE OF OAK BROOK SPECIAL MEETING Minutes Page 5 of 7 May 10, 1999 with usage of the Bath and Tennis Club and if expanded further, would improve the revenue generated. President Bushy indicated that one of the reasons Paul Butler would not sell the property to the Park District was because the State of Illinois is the only state in the nation that has separate park districts from municipal government. He was aware that a park district uses all of their property for activities and, therefore, chose to negotiate a sale to the Village of Oak Brook so the Sports Core property would primarily remain open space. Many surrounding communities have a Department of Parks and Recreation within their municipal government rather than a separate taxing jurisdiction. In Oak Brook, residents pay property taxes to the park district whether a resident uses it or not. Large revenues could be made on this property, but the Village Board has chosen to limit the amount of activities that may occur on the property so that it is not used in its entirety. Village Manager Veitch explained that the Village Board has continued to provide preferential rate fees for our residents' usage of the golf course. Additional Golf revenue of approximately $250,000 could be collected under a different set of policies, but the Village Board maintains the philosophy that was developed in the 1970's and wishes to continue it. Mr. Xinos asked if the bond issue in question is defeated, would the Village change any of its operations or decide not to improve any of the proposed municipal building projects. Finance Director Langlois commented that the projects may be extended to when funds are available for financing them. Mr. Xinos asked if there was a method to disband the Village's park district. President Bushy remarked that a voters referendum would need to be proposed by voter petitions. If successful, it would be placed on a ballot for voter approval. President Bushy added that she was not a proponent of such a referendum. Another resident indicated the large municipal taxes paid in Hinsdale may then occur in Oak Brook. President Bushy commented that it is possible duplicated costs at the park district and Sports Core could be combined to diminish some of the costs if the park district was incorporated into a department of our municipal government. President Bushy discussed the proposed expansion of the municipal building and the improvements needed for personnel. She thanked the residents in attendance of the meeting. 4. ADJOURNMENT: Motion by Trustee Savino, seconded by Trustee Caleel, to adjourn the Special Meeting at 9:10 p.m. VOICE VOTE: Motion carried. VILLAGE OF OAK BROOK Page 6 of 7 May 10, 1999 SPECIAL MEETING Minutes ATTEST: Linda K. Gonnell C/ E Village Clerk -� Special Mtg 51099 VILLAGE OF OAK BROOK Page 7 of 7 May 10, 1999 SPECIAL MEETING Minutes O " G � 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: wwu,.oak- brook.or,, NOTICE OF SPECIAL MEETINGS Public Information Meetings on the Proposed Sale of General Obligation Alternate Bonds May I" and May 10th NOTICE IS HEREBY GIVEN that a majority of the members of the Village Board of Trustees may 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:bond issue 1999