Don Grady is a CPA and Professor of Accounting at National Louis University, Chicago.
When municipal officials want to build for the future, they have a powerful financial tool at their disposal: general obligation bonds that yield millions of borrowed dollars. The money is meant to let municipalities move forward on costly projects that will serve the community for decades.
In a recent Chicago Tribune article, it was disclosed that the city of Chicago has amassed over $18 billion in debt from bond obligations issued through the city, public schools, and park district. That amounts to approximately $6,800 per Chicago resident.
These bond obligations keep âkicking the can down the roadâ so that future generations struggle with the repayment of the obligations. This situation just exÂŹacerbates current struggles that municipalities have in balancing their budgets without further inÂŹcreasing property taxes. I think I have adequately shared my own frustration with the continuing increases in property taxes here in Sun City in my past columns.
From a recent Daily Herald article, I learned that the Huntley Park District might put forth a $20 million bond referendum in March, 2014. The Park District currently has two outstanding bond issues that will expire in 2015 ($9.35 million) and 2018 ($5.7 million). According to Thom Palmer, executive director, the Park District would plan to restructure the debt to avoid increasing property taxes â kicking the can further down the road.
According to the article, the new bond issue would be used to fund the construction of an artificial turf facility used for indoor soccer, softball, lacrosse, and football practice and would possibly house other amenities, such as a bocce ball area.
According to Palmer, there wouldnât be any increase in property taxes because the facilities would generate âsignificant revenueâ through user fees â beyond the cost of operations and maintenance. Palmer said in the Daily Herald article: âHoldÂŹing your taxes as is, that is the question.â
I am a bit skeptical on these assumptions. First of all, I donât think the objective should be to hold our taxes as is. How about trying to reduce our taxes? The article also disclosed that if we let the existing bonds expire on their original schedule (2015 and 2018) our property taxes would go down by $125 per year vs. a reduction of $35 per year if the referendum is approved.
Secondly, I am remembering a similar plan that Hoffman Estates had years ago in floatÂŹing bonds for the Sears Centre. Hoffman Estates had to assume responsibility for the Centre after it failed to produce the âsignificant revenueâ it was projecting from sports events. We have seen lacrosse, hockey, and footÂŹball teams come and go at that facility.
We seem to have a penchant for âkicking the can down the roadâ and pushing the responsibility for paying off debt to future generations. I, for one, would like to see us retire our bonds/debts and dispose of the can.
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