Questions about the Referendum Terms

In response to concerns about the financial terms of the Helen Plum Memorial Library District Proposition to Increase the Limiting Rate, the Library reached out to bond attorney Kelly Kost and bond underwriter James Rachlin for clarification of the complicated wording of the referendum on the November 8 ballot.

Why didn’t the Library Board include the provision of a so called “sunset clause” that would end the tax rate increase in 20 years, after the bond debt has been paid off?

The simplest answer is that unfortunately the law does not allow for this approach.  There are some Illinois statutes that permit a voted tax levy increase to sunset.  A limiting rate referendum, however, is not one of those.

According to Rachlin, “The concept of not binding a future board relates to long-term contracts that a board may wish to enter into.  The general rule is that a local governing body is barred from entering into a contract that limits itself or its successors from performing governmental duties.  In other words, a board can only enter into such contracts when it has been authorized to do so, either explicitly or implicitly, by state statute.  If a statute grants a board explicit authority to enter into a contract that is binding on its successors, a court will recognize the board’s authority to grant this power and only invalidate such a contract if it is prohibited by the state constitution.

Kost adds, “The limiting rate referendum will increase the aggregate extension base and it will be up to future boards to determine how much taxes to levy each year, thus affecting the size of the aggregate extension base.  There is nothing a current board can do to force a future board to lower (or increase) levies to certain levels.

After 20 years, when the bonds are paid off, the Library Board at that time will have to make the decision as to whether or not to reduce the 0.131 levy rate they had been paying on the bonds. The bonds themselves will be paid off and done, however the authority to levy that amount will remain unless the Board chooses to reduce the levy. There are reasons they might (the building is in good shape and the finances are good) and reasons they might not (if the opposite is true). The current Board today cannot legally bind the Board 20 years from now to an action.

So why is the referendum set up this way?

Rachlin responds, “There is a bit of a dilemma in setting up referendum questions. The way the law is written (and you have to follow the statutes) you have to pick which approach seems best.‎ Either you have to go out and vote a single question, giving the library sufficient funds to both build and operate the library, or vote two separate questions – a bond question and an operating question. The latter would accomplish having the bond levy expire when the bonds are paid off.

There is a big problem with the two vote approach, however, that I have seen too many times. Specifically, the bond referendum passes but the funds to operate it don’t get approved. Communities end up with a library they can’t afford to operate. The building runs on‎ limited staff and reduced hours.

The single question approach the Library is using solves this problem – either the community votes enough money to do the job properly, or it doesn’t happen. But they do need to take a leap of faith that a future Board will do the right thing for the library and the community once the bonds are paid off.  And residents can make their feelings known at that time too.”

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