Lake Zurich taxpayers are expected to save at least $300,000 in interest payments through a proposed debt refinancing authorized by the village board.
Finance Director Jodie Hartman said the village intends to reduce the interest payments on roughly $7.2 million in outstanding debt connected to a 2005 loan obtained through bond sales to investors. The money was used for capital improvements in a special taxing zone designed to encourage downtown redevelopment.
Hartman said the village received "a great opportunity" to refinance the debt to an average annual interest rate of less than 2 percent. That would compare to interest rates of 3.75 percent to 4 percent paid by the village.
Provided the refinancing goes through, Hartman said, a preliminary analysis shows the village would save $300,000 to $360,000 in interest payments for the life of the loan through 2024.
Village board trustees this week voted 6-0 in favor of authorizing the pursuit of the refinancing. A final vote is expected Aug. 18, which officials said allows enough time to comply with a state statute giving residents 30 days to circulate petitions if they want the issue decided by voters.
Before the village board vote, Lake Zurich activist Jim Tarbet questioned whether the refinancing would be permitted under state law. Mayor Thomas Poynton alluded to Tarbet's position before he was reassured by Hartman that the proposed refinancing was vetted by financial and legal experts.
"I assure you, all of it is legal and completely above board," Hartman said.
Village Manager Jason Slowinski said Lake Zurich is trying to achieve financial sustainability. He said the effort should include adoption of financial policies, revenue enhancement, financial trend analysis, expanding the tax base through economic development initiatives and controlling personnel costs.
"Clearly, there's no question, this is the greatest challenge our organization faces," he said.
Money is an issue in Lake Zurich because village government has about $28 million in outstanding debt associated with the long-stalled downtown redevelopment. Officials said about $16 million of the debt is attributed to property purchases within what's called a tax increment financing district meant to rejuvenate the downtown.
In a TIF district, property tax revenue is frozen at a certain amount and any additional revenue goes into public improvements rather than to local governments.