Lake Zurich to extend its debt payment
Acknowledging the village can't afford to pay its debts, Lake Zurich officials Monday night agreed to refinance $16 million in existing loans borrowed for downtown redevelopment.
The village has roughly $26 million in outstanding debt but in actuality has spent more than $32 million in total redevelopment costs.
It plans to refinance only a portion of those loans, pushing back principal and interest payments due within the next five years out to 2017.
"Anywhere between 2017 and 2025 is when those principal payments will become due," said Al Zochowski, Lake Zurich finance director.
Those bonds were meant to be repaid with the tax on increasing property values captured from within a special financing district established in 2002 to fund downtown redevelopment or, alternatively, sales taxes.
That redevelopment stalled in 2007 due to the housing market slump, leaving one of two downtown redevelopment projects unfinished and the other dead in its tracks. The projected incremental revenues expected from those projects didn't materialize.
Layoffs and service reductions could be on the horizon if the village uses sales tax revenues to plug the deficit in the tax increment financing fund, Zochowski said.
"The reason we are doing this (refinancing) is the TIF fund is in such a position that we can no longer continue to pay the debt service obligations of the village," he said.
A public hearing on the bonds is set for Monday, Dec. 1. Residents have 30 days from today to petition the village with 882 signatures of registered voters to stop the bonds from being issued and forcing a referendum on the matter.
Resident Jim Tarbet said he is concerned whether the village would actually repay the refinanced debt as promised with TIF district revenues because it failed to do so in the past.
"With the refinancing, this totally becomes a general obligation of the taxpayers," he said. "This is a failure, and nobody is willing to admit the failure or deal with the problems. They keep wanting to buy success."
Village officials are also considering extending the 23-year life span of the tax increment financing district set to expire in 2025. That would require approval from the Illinois General Assembly.
"We may ask the state legislature to extend it for an additional 12 years," Zochowski said. "It's actually going to be an easier sell with this economic climate because the legislature is understanding that even good municipalities like Lake Zurich will need some extra help."
Lake Zurich would have to show it can repay its debt within the new time frame.
"We're only counting on revenues that we know we already have," Zochowski said. "We are not going to be including revenues that we think we'll have three or four years from now."
If nothing else gets developed in downtown, the village should still be able to pay off its debt by 2028 with existing revenues, he said.
The village's yearly principal and interest payments on the loans amount to roughly $1.7 million, yet it collects only about $1.3 million in TIF revenues from the only finished redevelopment project within the district - Concord Village subdivision.
This year, the village borrowed from its water and sewer fund to pay its debt obligations.
Zochowski said refinancing won't result in lower interest rates but would allow the village to repay its debt without having to increase property taxes.
"And we don't want to do that," he said.