Let’s face it. Everyone knows that taxing districts have various obligations — police, fire, education, roads and bridges, parks and more. In order to pay for these goods and services property owners are taxed.
Each year, taxing bodies levy taxes to capture the amount needed to operate. These taxes are paid by property owners throughout each district. If the money cannot be obtained through the levy, the taxing district is likely then to borrow funds through municipal bonds.
There are two types of bonds — general obligation and revenue.
With general obligation bonds the principal is backed by the full faith and credit of the issuer and supported through property taxes. Typically these bonds become the obligation of the community through a voter referendum.
Revenue bonds are typically backed by the revenue of a specific public project or enterprise. Examples include water systems, toll roads, lease payments and airports.
Nearly every taxing district has borrowed money at one time or another. Not all borrowing is bad. The key is how government entities go about borrowing it.
In Illinois, there are two methods — the “front door” and the “backdoor.”
The “front door” process is as simple as it sounds. It’s open for the public. The taxing district informs taxpayers why it needs the money and then places a referendum on the ballot asking for their approval.
In contrast, the “backdoor” approach is when a taxing district passes a resolution to borrow money without the public’s permission. This tactic — perfectly legal in Illinois — is the path of least resistance.
A taxing body wants money and it approves the means to get it. It’s a legal “loophole” allowing the authority to issue bonds without asking taxpayers.
Case in point: The Madison County Board passed an $18.8 million bond resolution on Oct. 16 so that it could borrow money for a jail remodeling.
This “backdoor” method may be legal, but is it right? People in Madison County feel it isn’t and many never realized their approval wasn’t required to increase taxes. In Missouri, voters are required to approve bonds.
In order to force a referendum on the March 18, 2014, ballot so that taxpayers could vote volunteers were required to get signatures from 10 percent of the county’s registered voters. Volunteers throughout the county collected nearly 24,000 signatures, which was more than close to 6,000 more than required.
On Nov. 18, the group “Bonds on Ballot” used a wheelbarrow and hauled petitions into the County Clerk’s Office. Some might say it was over-the-top, but it is the people who are “carrying the load.”
People worked hard to collect signatures and have the right to vote.
People are tired of arrogant government and want a say in how their money is spent, especially when it increases their taxes. Some county officials claim this new indebtedness will not bring about tax increases.
The argument that taxes will not increase is ridiculous. There is no such thing as a free lunch. Once the bonds are issued the levy must be extended to cover the amount for the bond re-payment schedule.
It took 30 days to gather the signatures— the time allowed by law. It was a colossal effort by all involved, but “we the people” of Madison County spoke up.
Just when you think it’s over, a Democrat activist challenged the petitions. Interesting enough, this same individual accused me two years ago for stating the “real and imagined shortcomings” of two former Democrat treasurers. We all know how that story ended. This month, one of those former elected leaders is set to be sentenced in federal court.
Kurt Prenzler is a CPA and Madison County treasurer.