News Releases - 2002

Leveraged Loan Program to Assist Local Water and Sewer Projects Advances

Chicago, Ill. -- The Illinois Development Finance Authority gave preliminary approval today to issuing up to $150 million in revenue bonds for the state's first leveraging program to increase funding for loans to local governments for water and sewer projects.

IDFA is expected to give final approval at its March meeting, with the bonds expected to close in late April.

"I am pleased the State of Illinois has the opportunity through this financing to increase funding for these local government projects," said Governor George H. Ryan. "This program assists local governments in maintaining environmentally sound systems and meeting the growing needs of our citizens."

Proceeds of the initial bond issue are expected to provide up to $75 million in additional funds for clean water (sewer) and drinking water loans. The bonds will be secured by a pledge of repayments from existing loans as well as the new loans and a reserve fund.

The State hopes to obtain AAA ratings on the issue. Final structuring details have not yet been determined, but the bonds are expected to be at 6 percent, with interest exempt from federal income taxes but not state income taxes.

Local governments will continue to pay a fixed interest rate of 50 percent of market rate.

Illinois EPA undertook a demand survey which showed substantial unmet demand for the loans, and hired Lamont Financial Services to help design the program.

"This additional funding is especially vital because of stricter new federal regulations, particularly for arsenic and radium levels in drinking water, that will result in additional treatment costs to local governments," said Illinois EPA Director Renee Cipriano.

The funding will supplement the wastewater loan program, began in 1989, and drinking water loan program, began in 1997. Both of these programs are capitalized with federal funds plus a required 20 percent matching contribution from the State.The programs have provided more than $1.3 billion in low-interest loans to communities across the state.

Illinois EPA Director Renee Cipriano said her agency will continue to administer the loans after the leveraging, with only minor changes to the current application requirements.