1 Most people have heard the term “bond issue,” but walk us through the process. The board has voted to move on it, but what's next?
State statutes dictate the entire process. On May 3, the library published the required Notice of Preliminary Determination, communicating to the public its intent to issue the bonds. That starts a 30-day petition period to determine if the approval process will require a referendum vote.
Once the referendum question is determined, the next step will be to get the approval of the Allen County Council to move forward with the issuance of the bonds. Because the Library Board of Trustees is an appointed board, the approval of the elected County Council is required before proceeding with the bond issuance, whether or not there is a successful referendum.
2 The total cost of the project is $125.5 million, with the library contributing $26.5 million. Could the library contribute more than that amount?
The $26.5 million the library is contributing to the project is the result of conservative and diligent cost containment efforts the library board and senior leadership have exercised over the past number of years, generating $21.5 million currently held in reserve in the Library Improvement Reserve, Rainy Day and General funds.
In addition, because the implementation of this project is slated to take place over an eight- to 10-year period, we have projected that additional library funds will be generated that can be devoted to this endeavor. These will come from continued cost containment efforts, interest earnings on existing reserves and interest earnings on bond proceeds during construction. The additional money that will be available for the project is estimated to be $5 million.
3 How much can people and businesses expect to see in increased taxes? What are people paying now?
The median homestead value in Allen County is currently $136,700, and based on that value and typical exemptions, the tax levy would be $1.90 per month, or approximately $22.76 per year. For a commercial property valued at $100,000, the monthly tax levy would be $3.35, or $40.20 per year. Finally, for agricultural land, per every $100 acres of land the levy would be $5.03 per month and $60.30 per year. This may vary depending on any exemptions claimed by the property owner and the tax cap.
Currently, all bonds issued by the library for previous capital projects were paid off on Dec. 31, so the library is currently debt-free. Any debt service associated with this new project will not be in addition to any existing debt burden to the taxpayer. For most taxpayers, payment for the bond will be equal to or less than the amount paid during the prior 20 years.
4 What is the plan to get around the 20-year limit on debt if it will take 23 years to pay down the bond obligation?
Each individual bond issue is, by state law, to have a maximum term limit of 20 years. Our consultants have estimated that a facility transformation project of this size is likely to take place over eight to 10 years. There is also state law that requires units of government to spend down the proceeds of a bond issue in a timely manner, usually within two years.
It would be impractical for the library to issue all $98.5 million in bonds at once at the beginning of the project, since it would be impossible to complete everything within two years. Consequently, we are anticipating issuing the $98.5 million over three separate issuances, in 2023, 2025 and 2027. Because the 2027 bonds would have their final 20-year payment in 2047, the total number of years of debt service payments would be 23, but each bond series would be no longer than 20 years.
5 As chief financial officer, what your role is in this process?
In the short term, I am focusing on navigating the various requirements in the bond issuance approval process. Assuming the bond issuance receives the go-ahead, my role will then focus on hiring and working with the various consultants and advisors associated with the sale of the bonds. These would include financial and legal advisors, bond underwriters, rating agencies, bond trustees and paying agents.
Once the first bonds are sold, I will be setting up the various accounting and budgeting systems to receive and spend the proceeds of the bonds and arrange for the payments to the bond holders. Finally, as we start spending the funds on the various projects, I will be involved in the competitive bidding and awarding of the numerous construction-related contracts that will be necessary and on the land acquisition and sales transactions related to the project.