The village of Lombard will be using a new method of borrowing to fund $10 million worth of stormwater management and road construction projects this year under a plan trustees approved Thursday night.
The money will support an ongoing flood relief project at Terrace View Pond on the village's northwest side as well as upgrades to a pumping station on Route 53 that could improve stormwater control in up to a third of the village. Funding for resurfacing Finley Road, resurfacing and sewer work in the neighborhood east of Madison Meadows park, and water main repairs under some sections of Roosevelt Road also is included.
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Instead of selling bonds, as municipalities looking to borrow money often do, Lombard will be taking out a $10 million loan and simultaneously buying $10 million worth of bonds as investments. Revenue the village receives on the bonds will be used to pay back the loan over seven years, finance director Tim Sexton said.
The village had been exploring alternative borrowing methods since an attempt to issue bonds last summer failed. Sexton said the plan approved Thursday became the best option because interest to be received on the bonds will help offset the interest rate charged on the loan.
The village effectively will pay 1 percent interest on the loan from Wheaton Bank, and Village Manager David Hulseberg called it a "very cost-effective" way to borrow.
Lombard will use reserve funds to buy the bonds. Hulseberg said those same reserves could have been put directly toward the stormwater and road construction projects, but he said that would have brought the village's fund balance below the 25 percent level it strives to retain.
Taking a loan from a local bank also has the advantage of helping the village show possible future creditors it can and will repay all its legal debts, Sexton said. The village's credit rating was downgraded to BBB from AA last January after trustees denied to use taxpayer money to help the agency that owns the Lombard Westin hotel make a bond payment.
"We've always paid all our legal debts, and any money that the village owes, we're going to pay it back," Sexton said. "A large part of it just goes back to building up that credit relationship."
The funding available from the loan also will go a long way toward addressing flooding issues and completing some road projects, said Carl Goldsmith, director of public works.
A separate contract approved Thursday calls for demolition of four single-family homes to make way for relief sewers to be installed from Crystal Avenue to Terrace View Pond and for future construction of a pumping station on Route 53 near Phillips Court. The demolition, to be completed by Anthem Excavation & Demolition of Itasca, will cost $53,000.