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TO: Mayor Richard C. Irvin
FROM: Christopher Minick, Chief Financial Officer/City Treasurer
DATE: February 8, 2024
SUBJECT:
An Ordinance Reserving 2024 Volume Cap in Connection with Private Activity Bond Issues, and Related Matters.
PURPOSE:
To obtain the City Council's approval of an ordinance that will serve to reserve the city's 2024 private activity bond (PAB) volume.
BACKGROUND:
PABs are tax-exempt securities that are issued in the name of a state or local government for a variety of purposes that advance public interests. Classifications of PABs include, but are not limited to, economic development revenue bonds, industrial development revenue bonds (IDRBs), single-family mortgage revenue bonds, and multi-family mortgage revenue bonds. In essence PAB's are an economic development tool that allows for the issuance and use of tax exempt bonding for qualified private development projects. This lowers the financing costs for the project.
Although PABs are issued under the authority of a state or local government, the government concerned typically has no responsibility for repaying the debt. The development project concerned is usually responsible for repaying. PABs are commonly referred to as "conduit debt."
The Internal Revenue Code places a "cap" on the dollar amount of certain PABs that a state or local government may issue in a calendar year. Currently, municipalities are limited to an amount equal to $125.00 per resident per the current US Census Bureau population estimate.
The Illinois Private Activity Bond Allocation Act requires that Illinois municipalities declare their intent to use their allocation of volume cap for the current year. Any volume cap that is not "reserved" is automatically ceded to the State of Illinois.
DISCUSSION:
Based upon the city's currently estimated population of 177,866 Aurora's volume cap allocation for 2024 is $22,233,250. Some of the 2024 volume cap may be dedicated to the issuance of IDRBs in support...
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