Village Begins Talks with D95 Regarding Potential Funding Reductions

joined the School Board at their meeting Thursday to begin discussions on how the two boards might work together to minimize the impact of the village’s skyrocketing debt related to a special tax district. 

The potential collaboration would help to address the village’s debt obligations due in the downtown in 2014, and how the village will be able to afford them, in addition to its financial responsibilities to the school district.

Kane, McKenna and Associates Inc., the consultant hired by the village to analyze the entire TIF district, presented background information to the school board regarding financial constraints the village is anticipating in roughly two years.

“The issue is the magnitude of the disparity of revenue and financial obligations in 2014; the principle payments, debt service payments, almost double,” said Robert Rychlicki, executive vice president of Kane, McKenna and Associates.   

Rychlicki also provided information on the TIF’s overall financial condition, debt service and other financial obligations it must meet.

One of those financial obligations is to the students who attend District 95 schools.

Since the TIF district was created in March 2002, District 95 has received payments from the village from increment building revenue within the TIF district. The payment is required by state statute.  

The formula that determines the amount of funding each year is based in part on the number of District 95 students who actually reside within the TIF district. The other piece of the equation is the "per-student fee," which can change from year to year.

This school year, there were 61 students living in the TIF, and that number was multiplied by the per-student fee of $9,712. The payment to District 95 for the 2011-12 school year was $592,000.

During the 2010-11 school year, the student fee was roughly $10,000, and the payment made to the schools by the village was $670,000, said Al Zochowski, Lake Zurich's finance director.

Though it was only a starting place, the consulting firm did include a possible 50 percent temporary reduction in the village’s payment to the school district as part of the solution to the looming revenue vs. expenses issue.

Initially, one member of the school board was not inclined to consider the idea.

“I feel that there needs to be a partnership, but I don’t think we have any intent to waive receipts — not a penny,” said board member Doug Goldberg. “My biggest concern is there is not a quick remedy.”

Rychlicki said that even if development began today, it would take at least three years for the increment to have any effect on TIF revenue.

As the discussion went on, the school board’s position became more intent on understanding the full picture that affects not only the school district, but also the village as a whole.

“We may want to start some bartering; we do have to think outside the box and put our heads together to tackle this,” said school board member Tony Pietro.

One school board member recalled the village stepping in to help District 95 when it, too, experienced difficult financial times.

“When we were having hard times a few years ago, we had to get rid of the community service officer stationed at the high school and the village helped us get that back. I appreciate that and I want to work with you on this,” said school board member Jim Burke.

Rychlicki said that in addition to the rough economy, different developers with different advice served to complicate progress in the TIF over the years.

“Then we hit 2008, and in our 30 years, we haven’t seen anything like it with residential, commercial, industrial and mixed-use developments,” he added.

Within four different scenarios presented, Rychlicki also laid out other ideas to ease the blow coming in 2014. They include extending the TIF for 12 years, the maximum allowed by state statute, and something that would need approval from the General Assembly.

If approved, the TIF would remain intact until 2037, with a recommendation from the consultant that payments to District 95 be reduced from 2013 until 2028. 

“There are a number of scenarios we can look at, like increasing payments (to the school district) as development comes in, starting at 50 percent and lessening that over time,” said Trustee Rich Sustich.

Another recommendation was to separate nonrevenue-generating parcels within the TIF district into a separate tax code, which would improve cash flow in the TIF district. That type of action would need the go-ahead from Lake County.

Restructuring existing debt, issuing limited bonds and decreasing operations and maintenance costs by 50 percent were other ideas presented.

District 95 has a $90 million budget. Superintendent Mike Egan said the loss of TIF payments in their entirety would represent a little more than half of a percent of the district's entire budget, and equal to the cost of 10 to 11 teachers.

“This is not a pretty picture, but I hope moving forward we can form a joint committee, a partnership here, with the spirit of openness to find a solution,” said Trustee Tom Poynton.