Oak Lawn plans to issue up to $70 million in bonds within the next several weeks to take advantage of low interest rates before Federal Reserve Bank rate hikes anticipated this year.
The Oak Lawn Village Board voted unanimously Tuesday to issue the bonds, $50 million of which would be used to refinance existing debt.
The remaining bond proceeds will be used for road construction and other capital improvements, land purchases and to repay loans from the village general fund to underperforming tax increment financing districts, village officials said.
“This is an excellent time to borrow,” said the village’s financial adviser, Daniel Denys of Austin Meade Financial, Ltd. The rates are historically low, Denys said, but are not expected to stay that way, so it is better to sell the bonds sooner rather than later.
The village plans to refinance five series of bonds issued between July 2006 and July 2017, all of which carry interest rates above 4%, said the village Finance Director Adam Metz.
The rate on the new bonds will not be known exactly until they are sold in two to four weeks, but Denys said he expects the annual interest rate will be about 2.5%. That would result in an interest savings of between $3.8 million and $4.6 million over 16 years, the longest maturity of the bonds being refinanced.
The remainder of the bond proceeds includes about $13 million earmarked for land acquisition and various capital projects, including infrastructure improvements.
“There are plenty of needs” in the village, Denys said.
Another $5.8 million will be used to repay advances the village made to the downtown tax increment financing districts, including the train station, and the Cicero Gateway TIF, which runs along 111th Street from Cicero west to Lavergne avenues.
The village credit rating from Standard and Poors improved slightly recently. The village had been rated Triple B minus with a negative outlook.
“The negative outlook was removed,” Denys said, although the rating remains Triple B minus.
“It’s not greatly improved, but a step in the right direction,” said Oak Lawn village manager Tom Phelan.
The agency cited improved financial flexibility, as the reason to remove the negative outlook, Denys said.
“You are showing strong revenue growth, which is a reversal of what has been going on historically,” Denys said. “You have made commitments to strategic tax increases,” such as raising the home rule sales tax by half a cent and increasing water and sewer fees.
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Credit rating agencies, however, want to see improved finances over a three- to five-year period.
Phelan said two shortcomings in the agencies’ eyes are the village’s pension liabilities and low fund reserves.
“In the last eight years, this board . . . made a dramatic commitment to funding pensions,” Phelan said, “and the sad state of affairs is no matter how much you put in, it’s hardly enough.”
As far as keeping funds on hand for emergencies and unforeseen problems, Oak Lawn officials do not want to have millions and millions of dollars sitting in reserves, he said. The village has purposely kept property taxes level, viewing that as favorable to both homeowners and businesses.
Until last year, the village property tax rates had stayed the same since 2008, Phelan said.
Kimberly Fornek is a freelance reporter for the Daily Southtown.