A Very, Very Bad Deal for Taxpayers
Despite what Longmeadow Parkway proponents are saying, the project could become a significant new load for already overburdened taxpayers; and, it is a burden that will not be averted by bridge tolls.
KDOT has not published a financial plan for the project, so our citizens group has developed a plan that approximates what we believe the County will do. It indicates that State taxpayers (that includes Kane Co. residents) will bear $63 million of the cost, federal taxpayers will pick up $4 million, and the remaining amount, over the course of 30 years will be paid either by tolls from the bridge and possibly from tax revenue, depending on how the project is financed.
Typically, local governments raise capital funds for infrastructure projects by one of the following mechanisms:
- General Obligation Bonds – Principal and interest paid from county tax revenues (property taxes, sales taxes, motor fuel taxes, etc.). These bonds carry a relatively low interest rate because they are backed by County’s taxing power. G.O. bonds require a referendum.
- Revenue Bonds – Principal and interest paid by revenue raised by the project (in the case of Longmeadow, from bridge tolls). Higher interest rate because they have higher risk; backed only by toll revenue; must have 25% debt service coverage; no referendum required.
- General Obligation Alternate Bonds – Principal and interest paid from project revenues (tolls) or County tax funds if tolls are insufficient; low interest rate because of County tax revenue pledge; referendum required ONLY if 7.5% of voters sign petition requesting one.
- Public-Private Partnership – Private sector, profit-driven entity agrees to develop, possibly own and operate project and be paid back from project revenue (tolls); legally complex; politically controversial; private entity must be convinced it will be profitable.
On June 23, 2010 the Longmeadow Parkway Toll Bridge Task Force which included Members of the County Board and local mayors recommended the use of General Obligation Alternate Bonds which could require a referendum. We believe state law requires that only Revenue Bonds can be used for the bridge.
Taxpayer Burden – Even under KDOT’s overly optimistic projections of traffic across the bridge, toll revenue will be insufficient to pay principal and interest on a $70 million bond issue for many years. If Alternate Bonds are sold, as the Task Force recommended, during the first 10-15 years of the life of the bonds, when toll revenues will not be adequate to service the debt, County taxpayers will be called upon to make up the difference.
However the County attempts to finance the project, the County’s optimistic projections of future traffic and toll collections are out of date and unsupportable. They are based on data collected from 1990 – 2006, a period of rapid growth in Kane Co. KDOT has assumed that this growth will continue. In reality, since the plan for Longmeadow was developed, growth in our region has been falling steadily, and it is now approaching zero. On May 2015 CMAP, our regional planning agency, published this chart showing population growth:
The orange line shows that in 2001 Kane County’s population was growing at a rate of about 23,000 persons per year. By 2014 the rate of growth had fallen to 2,000 persons per year; a 90% decrease. These are sobering numbers for our region, and they show that one of the basic justifications for Longmeadow, to serve future growth, is simply a very expensive fool’s errand.
When the anticipated growth in future toll collections does not happen, County taxpayers may be called upon to pay an even larger share of the cost of the bonds.
A Major Additional Risk Lurks to the North – The financial outlook for Longmeadow Parkway is bad, but it could become much, much worse. In 2010 McHenry County published its 2030 Comprehensive Plan. In Section 7 of the plan, on page 107 the County’s plan for road and bridge improvements is shown on a map. The map shows the recently completed western by-pass of Algonquin, the 6-lane widening of Rt. 31 (currently under construction) and a 4-lane bridge across the Fox River north of Algonquin. This bridge was not included in the traffic studies of Longmeadow Parkway. Although we have seen no studies of the impact of this bridge on traffic flows, it seems intuitively obvious that a bridge north of Algonquin will divert much of the traffic away from Longmeadow. Longmeadow toll revenue will drop precipitously, and the full burden of bond payments may fall on Kane County taxpayers.
Summary – As discussed in other documents on this website, Longmeadow Parkway is shown by KDOT’s own data to have no effect on reducing traffic congestion. As discussed here, it could become a major burden on County taxpayers when tolls will not pay for it. If and when the County publishes the financial plan, it must be carefully examined both by taxpayers and potential bond buyers.