State's bond rating will affect cost of Kane forest tax hike
The success or failure of Illinois lawmakers' attempt to pass a budget for the first time since May 2014 will play a role in exactly how much it costs Kane County taxpayers to buy new forest preserves and open existing lands to the public.
And forest preserve officials are not optimistic.
Kane County voters approved a $50 million tax increase for the forest preserve district in April. The district will sell bonds to raise that cash July 10. Budget debates in Springfield will conclude by then, but major bond-rating agencies already are promising to drop Illinois' rating to junk bond status. If that happens, all taxing bodies in Illinois, including the forest preserve district, will pay more to borrow money.
The forest district has an AA+ bond rating on its own. But finance director Ken Stanish said all bonds sold in Illinois come with an asterisk reflecting the state's budget uncertainty, and uncertainty in the markets means you pay more.
"One thing that will definitely happen is when we go out to market on the $50 million bond deal, the residents of Kane County will be paying a higher interest rate because of the state's bond rating," Stanish said. "There is a premium on the interest rate costs because we are in Illinois."
The district won't know what those interest rate costs will be until they take the bonds to the market. Higher interest rates mean it will cost Kane County residents more to pay off the original $50 million debt.
Forest district officials also are keeping an eye on the state's Open Space Lands Acquisition and Development grants. The district received a cease and desist letter from the Illinois Department of Natural Resources about its plans to open the Hoscheit Woods preserve.
Federal officials are taking a closer look at grant money given to states, including the OSLAD program. Right now, the district is waiting for about $1 million in grants it expected but has not yet received. If district officials move forward with the construction work at Hoscheit Woods and the Brundige Forest Preserve, they stand the risk of not being reimbursed for $1 million of worth they thought would be funded by those grants.
On the positive side, forest preserve officials said they would take about $30 million of the $50 million tax increase and put it in short-term investments. Any return on such investments would provide more cash for land purchases or construction plans. The district will keep about $20 million cash available for any land acquisition opportunities that come up.
"I don't see another Brunner-type purchase on the immediate horizon," Commissioner Mark Davoust said. "The only pressure we will try to adhere to is keeping to a three-year window where we'll try to expend 85 percent of the land acquisition funds."
The district expects to receive the referendum proceeds from the bond sale by July 26.