Property owners in South Holland, Harvey, Dolton and other parts of Thornton Township High School District 205 can expect lower taxes despite plans to spend $30 million to improve school facilities, a district official said.
The district's plan to issue $30 million in funding bonds to pay for capital improvements will reduce the annual tax levy, said Tory Horton, the district's director of business operations.
Though the district assures residents that taxes are projected to decrease, it's using a controversial method known as a “backdoor referendum” to issue bonds to pay for new bleachers, roof repairs and other upgrades.
Contracts have been awarded and some work is underway. District 205 serves 5,079 students at three schools: Thornton Township High School in Harvey, Thornridge High School in Dolton and Thornwood High School in South Holland.
At Thornton Township High School on Thursday, workers were preparing to demolish a set of aging bleachers at the football stadium along Broadway Avenue south of 148th Street.
Back in 2015, Horton said, the school board approved a plan to issue $65 million in bonds to pay for major improvements based on the assumption the district would receive funding through the state's School Construction Bond program.
A year ago, District 205 learned it was ranked No. 34 out of 191 applicants for funding, and that only the top 29 ranked schools were approved for the program. District officials then scaled back their plans.
“The board ultimately agreed to address $30 million of critical capital projects over the next three years,” Horton said.
Meeting minutes from November show officials discussed plans to spend about $3 million at each school for bleacher replacement and other stadium improvements for a total of nearly $9 million.
Roofing repairs were projected to cost about $1.9 million at Thornwood and $900,000 at Thornton. Tuckpointing was estimated to cost $1 million total for all three schools.
Horton told me the bulk work at the schools will be performed this summer.
“We're right where we need to be on the timeline,” he said.
I learned of the proposed bond issue when a sharp-eyed reader alerted a colleague to a legal notice District 205 published in the Daily Southtown on March 9. Publication of that notice triggered a 30-day window for potential opponents to attempt to collect enough signatures to block the bond issue by forcing the district to put the question to voters.
The legal notice said a petition could be filed objecting to the bond issue. The petition would have to contain signatures of at least 7,458 registered voters in the district, the notice said. Would-be opponents would have to scramble to collect signatures by April 8 to force a referendum on the bond issue. A majority of voters would then have to reject the bond-issue request when the question appeared on ballots at a later date.
The tactic is known as a “backdoor referendum,” according to state statutes. The process is controversial because it puts the onus on residents to put in the legwork to force a taxing body to put the question to voters.
Critics say the move lacks transparency and that it would be more responsible for government officials seeking revenue to initiate the process of putting a question on ballots.
Typically, backdoor referendums are a sneaky way of trying to raise taxes. But in this case, Horton said, taxes are projected to decrease.
“Although the final structuring of the debt has yet to be determined, the district is considering two options at this time,” he said.
One option is to set the final maturity of the bonds in 2025. That would reduce the district's annual tax levy to $7 million from $9.5 million and save the owner of an $80,000 home $30 a year, he said.
The other option is to structure the debt so the bonds mature in 2031. That would reduce the levy to $3.5 million annually and result in a net tax decrease of $75 a year for the owner of a home valued at $80,000, he said.
Based on Horton's explanation, I doubt in this instance homeowners would want to try to force a referendum on the bond issue. But the reader's question provided an opportunity to look into District 205's finances and explore the process of issuing bonds through a backdoor referendum.
The 7,458 signatures required in this instance is based on a state law that says signatures of at least 10 percent of the registered voters in a district are needed to force a referendum. Personally, I think that threshold is unnecessarily high.
Compare that mandate to the petition signature requirements for candidates seeking public office. They “only” have to typically collect signatures from 5 percent of the number of people who voted in the last election for that office. Turnouts for local elections typically run in the neighborhood of 20 percent. They usually have to collect hundreds of signatures, not thousands.
In Illinois, backdoor referendums are covered by legislation known as the Local Government Debt Reform Act. In 2013, under then-Gov. Pat Quinn, the Illinois General Assembly approved legislation making it easier for citizens to force local governments to put some tax increase proposals to a vote.
The change extended the time to collect petition signatures to 45 from 30 days and lowered the threshold to either 5 percent of registered voters or 5,000, whichever is less. The change, however, only affected a certain type of bonds, a backup-security tool known as alternative revenue bonds.
It's one of three types of bond issues allowed through backdoor referendums under the Debt Reform Act, said Steve Richart, a partner with Hodges Loizzi Eisenhammer Rodick & Kohn in Arlington Heights. The legal firm specializes in working with school districts, municipalities and others on bond issues.
Richart wasn't familiar with the District 205 bond issue and couldn't address its specific proposal, but he could offer general expertise about backdoor referendums.
The most common form of backdoor referendum requests are for working cash bonds, he said. Those can provide a school district or other taxing body with sufficient cash flow to pay regular bills while awaiting anticipated revenue that typically arrives when tax bills are paid twice a year.
District 205's situation is different in that it wants to issue something called finance bonds, which are specifically designated for paying bills and debts that have already accrued.
“I've never actually worked on a finance bond issue,” Richart told me.
Issuing bonds to pay off existing debt does not necessarily indicate a district's finances are troubled, he added.
“In general, school districts can issue funding bonds to pay claims in a variety of situations that don't suggest a district is in poor financial condition,” he told me.
I reviewed District 205's budget and other available information and found the district has been dealing with significant operating deficits in recent years.
The district's 2017 budget approved in September projected a $5.8 million deficit this year, with revenues of $100.3 million and expenses of more than $106.2 million. The summary page included a note that read, “Unbalanced budget, however, a deficit reduction plan is not required at this time.”
The district' 2016 School Report Card, reporting information for the previous fiscal year, showed the district running a 2015 deficit of more than $8 million with revenues of $101.3 million and expenses of nearly $109.5 million.
The state's most recent financial profile report, however, gave District 205 a rating of “Review,” the second-best designation after “Recognition” and better than “Early Warning” or “Watch.”
Despite continued deficit spending, the district's 2017 budget projects total fund balances at the end of the current fiscal year will be more than $18 million.
“The board felt that major capital projects should be funded by bond proceeds rather (than) critical fund balance reserves,” Horton said.
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