Bond sale booms, lawsuit looms

StoryImage( ‘/Images/Story//Auto-img-117329668629331.jpg’, ‘Photo by Stuart R. Wahlin’, ‘Although city leaders say they’re not worried, the City Council went into closed session to discuss possible litigation challenging the city’s authority to extend the Metro Tax.‘);
StoryImage( ‘/Images/Story//Auto-img-117329687026657.jpg’, ‘Photo by Stuart R. Wahlin’, ‘John Miller, a city financial adviser, said the recent Wall Street shake-up worked in Rockford’s favor.‘);

The City of Rockford announced the results of a $29,865,000 bond sale March 5, saying we got a great deal.

“I’m happy,” beamed Rockford Mayor Larry Morrissey (I). “We not only sold bonds, but we got very competitive rates.”

Twenty-three million dollars of the bonds are tied to MetroCentre renovations and the purchase of an American Hockey League (AHL) franchise. The remaining $6,865,000 is for refinancing debt associated with the 1999 Coronado Theatre renovation.

The Rock River Times was first to report the possibility of a lawsuit against the City of Rockford Feb. 28. Challengers question the city’s authority to continue levying the so-called Metro Tax, the redevelopment fund from which the city annually gives $912,000 to the MetroCentre.

City leaders maintain legislation has been on the books since 1990, giving Rockford the authority to renew the redevelopment tax, which also funds a number of other programs.

The City Council recently extended the tax until 2028, which will mark the end of the 20-year repayment plan for the MetroCentre project.

Although the annual subsidy has been used to fund arena operations, under the new intergovernmental agreement, the $912,000 will go toward bond repayment.

Metro Tax challengers argue state statutes do not authorize the city to extend the tax, which has already been renewed several times.

“We really don’t think there’s any merit to the potential challenge,” Morrissey said after the March 5 City Council meeting. “The bond market gave us a very favorable response to our offering, despite the fact of that threat of litigation.”

Although city leaders maintain they’re on firm footing, the council went into closed session March 5 to discuss the matter.

Some worried the possibility of a lawsuit might affect the bond rates, but John Miller said the sale went better than expected, drawing bids from throughout the country. Miller, the city’s financial adviser, said the legal challenge didn’t seem to affect the city’s A1 credit rating.

“Relatively low interest rates were received both for the tax-exempt and the taxable issue,” Miller reported.

Of the $23 million for MetroCentre improvement and AHL franchise purchase, $6.3 million of the bonds are tax-exempt, purchased by LaSalle Financial Services, Inc., for a 4.14 percent net interest rate. LaSalle was the lowest of six bidders.

The remaining $16.7 million in MetroCentre-related taxable bonds went to low-bidder Griffin, Kubik, Stephens and Thompson, Inc., for a rate of 5.35 percent. Ten bids were received.

The $6,865,000 in refunding bonds, sold to Harris N.A. for a net interest rate of 3.84 percent, will result in gross savings of $490,000 to taxpayers over 13 years, officials say. Seven bids were received for this issue, with Harris being the lowest.

The city’s share of the $18 million Coronado project was $7 million.

Miller suggested the recent market correction may have benefited Rockford in the sale of the bonds.

“The stock market was not doing well last week,” Miller explained. “Investors who took their money out of the stock market are looking for someplace else to put it. That someplace else, for a lot of these folks, is the tax-exempt market or a bond issue, which is, at these sort of times, a more predictable and safer investment than the stock market.”

The MetroCentre Authority is poised to ink a deal to purchase a dormant Cincinnati AHL franchise. With a franchise in place here, the plan to bring the Chicago Blackhawks’ farm team to Rockford for a 10-year deal is assured.

MetroCentre officials say the combination of a newly-renovated facility in a bigger league, with a team owned by the arena, will generate enough revenue to cover the operations gap left by diverting the annual $912,000 subsidy toward paying down the bonds.

As its part of the intergovernmental agreement associated with the estimated $20 million project, Winnebago County has pledged $9 million.

The County Board reluctantly conceded to the city’s plan to purchase a hockey team, but specified the county’s money may only be used toward renovations.

The Authority continues to negotiate with current United Hockey League (UHL) IceHogs owners, Dr. Kris Tumilowicz and Craig Drecktrah, to purchase all rights to their team.

Faced with the certain loss of his hometown club, Drecktrah has since taken his lottery winnings down the road and purchased another team, the UHL’s Chicago Hounds.

City Legal Director Patrick Hayes continues talks with Swanson, Martin and Bell, LLP, the firm representing challengers of the Metro Tax. There is still no word whether a lawsuit will be filed.

Proceeds from the bond sale will be available to the city on March 15.

From the March 7-13, 2007, issue

Enjoy The Rock River Times? Help spread the word!