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REDICK OPPOSES BOND PROPOSAL
BORROWING PLAN DEFIES COMMON SENSE BUDGET PRACTICES
FOR IMMEDIATE RELEASE
Thursday, August 12, 2010
For more information contact: 630-607-9681
WHEATON-DuPage County Board Chairman Robert J. Schillerstrom unveiled a massive bonding proposal that he claims is needed “to make substantial and necessary capital investments throughout the County.” However, the proposal has been met with skepticism and opposition by DuPage County Board Member Jeff Redick (District 2).
Redick, a Member of the Finance Committee called the proposal a “Blagojevich-esque approach to government. This is another example of borrowing money to pay for today’s activities with no regard for the future cost to taxpayers. This flies in the face of the hard work this board has been doing over the last three and a half years to implement sound long term budget practices and spending restraint.”
In total, DuPage County taxpayers would be on the hook to re-pay $124 million over the next 30 years under Chairman Schillerstrom’s plan. Annual payments go from 2.3 million per year to 5.9 million per year for the last 15 years of the proposed 30 year bond. Schillerstrom’s proposal is essentially a 30-year balloon loan. The purpose of the proposed structure is to delay the re-payment impact on the annual budget.
The proposal calls for the first year’s payment to be made from the proceeds being borrowed. In other words, there is no payment due on the bonds during fiscal year 2011. “Chairman Schillerstrom is proposing that we engage in a massive borrowing campaign but has structured it so that he does not have to deal with any of the problems associated with making even the first year’s re-payment in what will be his final budget before retirement” said Redick
“The annual payments increase significantly half-way through the term of the loan. I don’t think it is a coincidence that the payments jump up immediately after some of the county’s current bond debt is paid off.” According to Redick, “debt coming off the books is not an excuse to issue more debt; it is an accomplishment that should be celebrated.”
Chairman Schillerstrom’s proposal touts the fact that federal subsidies will provide $5 million in finance savings. However, Redick points out that “the balloon payment financing that is utilized to try to make this thing work actually costs the taxpayers $15 million more than a conventional 30 year fixed rate deal. In other words, even after the federal subsidy is factored in, the current structure results in $10 million in additional costs to the county.”
It is not just the repayment schedule that is troublesome. “You should never bond past the useful life of the item that is being purchased or built,” said Redick. “The use of these funds for IT projects defies common-sense. By the time the county would be done paying-off this debt the technology portion will be antiquated. Let’s put it this way, if the county would have similarly bonded for technology improvements 30 years ago, we would still be paying off DOS systems and Commadore 64 computers.”
The proposal is expected to be submitted to a Committee of the Whole for debate and consideration in the next two weeks.
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