Cook County plans to set up a $300 million borrowing program that eligible suburban Chicago local governments with taxing authority can tap for no-interest loans to manage a four-month delay in second installment property tax collections.
The bridge loan program will spare suburban taxing bodies from having to issue tax anticipation notes to bridge the gap, with eligibility tied to a local government’s need and their costs to access the capital markets. As many as 500 taxing bodies might qualify.
“We know that the four-month delay in funding will impact taxing bodies throughout the county. We also know that the impact will not be felt evenly and will disproportionately impact taxing districts in historically disinvested and local-income communities,” County Board President Toni Preckwinkle said during a briefing on the program Thursday.
The county is working with PNC Bank to provide a line of credit to fund the bridge loan program. The county interim Chief Financial Officer Lawrence Wilson’s office will manage the applications and distribution of loans. The administration will seek board approval this month for an up to $500 million of borrowing for the program supported by its own credit.
The application process is expected to launch next month with distributions begin in September. The county will prioritize loans based on an equity model established to distribute federal pandemic relief in the CARES Act: state school funding metrics, three-year average collection rates, and the need to fund vital services.
“Our plan is to disburse $300 million,” Wilson said. “We got the additional authority in [case of the] possibility that we underestimated the need,” he said. “We are not willing to go higher. We do not want to go higher and risk any undue burden on the county … we talked to our rating agencies and this is an amount we can do without any concern or any impact on our credit standing.”
Out-of-pocket administrative and interest expenses for a $300 million program total $5 million, which would rise to $8 million if the county taps all of the $500 million authorization. Loans will be paid back directly to the county as tax revenues are distributed.
The eligibility guidelines limit loans to taxing bodies with less than 120 days' cash on hand and at least one rating that must be at least one notch below the county. If an entity has a split rating and at least one is lower than the county, they are eligible. The
Paper districts, which serve as pass-throughs for tax collections to a third party, are ineligible as are overlapping districts with more than 1/3 of its jurisdiction outside of the county. Chicago-based taxing districts are also not eligible. The minimum loan is $20,000 and maximum would be based on expected payments and days' cash on hand.
Second installment tax bills are typically due over the summer. They are expected to go out late this year and due in time for homeowners to claim the tax exemption on their 2022 income tax filings.
Preckwinkle blamed the delays on a combination of the COVID-19 pandemic and a major technological upgrade still being completed — staying out of a dispute between two other elected bodies.
Cook County Assessor Fritz Kaegi, who manages property valuations, and the Board of Review, a three-member elected board that handles appeals, have blamed each other for the delays that stems from the technological transition to an integrated property tax system.
Chicago doesn't foresee a liquidity issue. "We have ample cash on hand and liquidity" with cash and investments of $4.5 billion at the close of 2021, which is nearly "equal to our 2022 corporate fund budget of $4.8 billion," finance department spokeswoman Rose Tibayan said in an email. "The delay is not expected to cross the end of our fiscal year."
Chicago Public Schools is a frequent user of TANs to manage cash flow, but has not said if the delay poses a challenge.
