Suburban Chicago governments rushing to issue bonds before a property tax cap goes into effect Oct. 1 are drawing fire from Gov. Jim Edgar and other proponents of the law.
The tax cap law, passed by the Illinois General Assembly last month, caps annual increases of property tax collections by nonhome-rule governments in five suburban counties to 5% or the rate of inflation, whichever is less. The law also requires the governments to get prior approval in a referendum to issue bonds backed by property taxes.
Public finance officials have said the looming Oct. 1 deadline has led to a flurry of new issues by governments seeking to avoid putting bond issues to a vote. Frank Paul, a senior vice president in the public finance department at Chicago-based Rodman & Renshaw Inc. said he expects more than 100 new bond offerings to be rushed to market before the deadline.
Supporters of the property tax cap law said the new bond issues are a violation of the spirit, if not the letter, of the new law.
"Many local governments and school officials are showing they did not get the message," Gov. Edgar said earlier this month. "They are rushing to issue bonds before the caps take effect simply so they can continue spending and spending. That should not happen, and it ought to stop."
Leading the way among the issuers flocking to the market is DuPage County, where the county board this month approved a $182 million alternative revenue general obligation issue, scheduled to be priced next month.
But one board member, Carole Ann Pankau, said she is working with local grass roots organizations to force a vote on the bond issue. Under existing law, a referendum would be required on the already-approved bond issue if within 30 days opponents can get 7.5% of registered voters in the county -- about 25,000 people -- to sign a petition calling for a vote.
DuPage County Clerk Gary King said that if the necessary number of signatures are collected, a referendum vote could not be scheduled until March. That would mean the bond issue would have to be approved by a referendum anyway, since the tax cap law goes into effect Oct. 1.