CHICAGO -- Local governments in Illinois will lose millions of dollars in property tax revenues now that state lawmakers have overridden a veto of a bill that grants a tax break to senior citizens.
The measure, which was passed by the legislature last summer and vetoed by Gov. Jim Edgar in August, also creates a new authority that can issue bonds backed by the state's moral obligation pledge.
The House overrode Edgar's veto on Tuesday following the Senate's override two weeks ago. The legislation freezes at 1994 levels the assessed valuations of homes owned by senior citizens whose annual incomes do not exceed $35,000.
Edgar told reporters on Tuesday that he was not surprised by the override. He warned that the measure will result in higher property taxes for non-senior citizens.
In his Aug. 19 veto message, Edgar said that senior citizens are already granted tax breaks and warned that schools and other local governments would loses "tens of millions of dollars."
According to the Illinois Department of Revenue, the loss to local taxing districts is estimated at $41 million next year, increasing to $249 million in 2002.
But state Rep. Jeffrey Schoenberg, D-Evanston, the bill's House sponsor, said the measure's impact will be "minimal" on local governments, while allowing senior citizens to remain in their homes.
Rating agency officials said the law's impact would have to be measured on a case-by-case basis.
Jon Reichert, a director at Standard & Poor's Corp., said the impact on credit quality would depend on "the financial flexibility that a municipality has in terms of raising other revenues, using other reserves, or controlling expenditures."
The law also creates an Illinois Research Park Authority that is authorized to issue up to $150 million of debt backed by the state's moral obligation pledge to build or equip facilities for university-related research parks.
Schoenberg said the bonds will be payable from revenues collected from the parks, such as lease payments from businesses and industries using the facilities. He said the state will benefit from enhanced economic development and job creation as a result of the parks.
In his veto message, Edgar said he had "difficulties with the notion of creating yet one more bonding authority and possibly risking the state's financial security."
In fact, Moody's Investors Service cited Illinois' "greater exposure" to contingent debt, including moral obligation debt, as one reason for a 1991 downgrade of the state's general obligation bond rating.
David Wood, general counsel to the state's Bureau of the Budget, said the Edgar Administration will probably not rush to create the authority. He said the state recognizes Moody's concerns over Illinois' outstanding moral obligation debt, which currently totals about $1.7 billion.
Wood added that it "is not a given" that the state would issue all or any of the debt "right away with a moral obligation" pledge.
The measure adds yet another bonding authority to the state. More than two years ago, the Edgar Administration launched a study on the possible consolidation of some of the state's approximately two dozen bonding authorities.
Wood said that it is uncertain whether the administration would continue to pursue consolidation.
Bob Kurtter, a vice president at Moody's, said the creation of the authority is consistent with what the rating agency has seen in other parts of the country.
"Moody's doesn't recognize a moral obligation pledge, and as a consequence we'd look to other pledges to achieve investment-grade status," Kurtter said.
