Village Refinances the 2004, Nets $1.3 Million in Savings
During the August 15, 2016 Board Meeting, the Lisle Board of Trustees approved a bond sale that occurred earlier in the day to refinance the 2004 bonds issued by the Village to help construct the Village of Lisle/Benedictine University Sports Complex. The 2004 bonds, which totaled $6.4 million, were issued as General Obligation Bonds (Alternate Revenue Source) and funded entirely by a 2% increase in the Hotel/Motel Tax. The refinancing of these bonds in 2016 provides the Village an opportunity to achieve savings due to an improved interest rate environment and to eliminate a balloon payment of $2.4 million in 2024. The resulting bond sale provides the Village with $1.3 million in savings over the existing debt schedule.
The following information provides a background review leading up to the bond sale.
Village Seeks to Refinance Sports Complex Bonds
On April 18, 2016, the Village Board approved an ordinance to proceed with refinancing the bonds sold in 2004 to build the Village of Lisle/Benedictine University Sports Complex.
In 2002, the Village began working with Benedictine University to construct a Sports Complex on its campus. At the time, the Village Board viewed this project as means of meeting a community need. Both School District 202 and Benet Academy did not have the ability to play night football and a request by School District 202 to install lights at Wilde Field as a Special Use was turned down for the second time.
Discussions with Benedictine University resulted in a combined effort to install a modern football field and track facility. Cooperating in the construction of the facility would provide an opportunity for the high schools to use it for Friday night football games. A modern track facility was viewed as having the potential for attracting visitors for major track and field events. Ultimately, the project led to the annexation of Benedictine University into the Village of Lisle, created a football field for both high school and university use and created a track facility that could attract events state-wide or regionally.
The agreement with the Benedictine University required the Village to contribute approximately $6 million to fund the construction of a football/track facility. By the time the project was completed, Benedictine University had expanded the project to include a baseball and softball facility. The final cost of the Sports Complex was approximately $11 million. All costs higher than the Village’s original commitment of $6 million was to be paid by Benedictine University. In issuing bonds to pay for the Village’s commitment to the project, the Hotel/Motel Tax was raised from 3% to 5%; the additional 2% would be used to pay off what ultimately became a $6.4 million bond issue. Lisle hotels supported this measure as the project was expected to attract visitors (and overnight hotel stays) to Lisle.
Village Role in the Sports Complex
In 2004, the Village’s responsibility to the Sports Complex was to finance the football/track fields via the issuance of bonds. Benedictine University was to be responsible for the management of the complex. That agreement remains the same today, and as a practical matter, the Village’s only responsibility to the Sports Complex is to pay off the bonds that were issued for the core project.
Refinancing the Bonds
Each year, the bonds have been paid from the Hotel/Motel Taxes generated by Lisle hotels. The original bond schedule called for a final ‘balloon’ payment of more than $2 million in 2024. The closing of the Hickory Ridge Marriott Hotel, the economic downtown and increased competition among regional hotels has resulted in insufficient funding available to make the final payment of the bonds from the Hotel/Motel Tax Fund in 2024.
Refinancing the bonds now will eliminate the final balloon payment in 2024 and allow the Village to take advantage of lower interest rates currently available in the bond market. A re-issuance of bonds will continue to use the Hotel/Motel Taxes as the funding source and extend the payments to 2033.
This bond issue, as with the original bond issue, refers to “General Obligation Bonds (Alternate Revenue Source).” General Obligation Bonds are usually secured at the best possible interest rates and require the full backing of the taxing authority. Each year, these taxes are abated as the payments are being made from an ‘alternate’ source – in this case, the Hotel/Motel Tax Fund. The Village Board is committed to continue paying off these bonds from a non-property tax source.
Refinancing the Sports Complex bonds is an effort to modify the original funding commitment made in 2004. It is the best means of meeting the financial commitment without impacting Lisle residents and business owners, as hotel visitors generate the revenue through Hotel/Motel taxes.