To: Larry Tomblin who wrote (10596 ) 12/12/1997 4:41:00 PM From: Moonray Respond to of 22053
3COM DEAL RAISES RESIDENT IRE ROLLING MEADOWS WOULD LIFT TAX CAP By Suzy Frisch, Tribune Staff Writer Web-posted Friday, December 12, 1997; 6:20 a.m. CST To lure 3Com Corp. to town, Rolling Meadows officials this fall dangled a $2.7 million economic development deal before the California-based computer networking giant. It was enough to convince 3Com to bring its Midwest regional headquarters and potentially more than 6,000 new workers to the decidedly middle-class suburb, which has languished for decades in the shadow of more affluent and showy municipal neighbors. But now the deal could be torpedoed by a group of Rolling Meadows residents. They complain that the city would have to violate its self-imposed tax cap to raise money for road work and other improvements at the proposed 3Com site, on Golf Road near Illinois Highway 53. City leaders acknowledge they would have to skirt the five-year-old cap, which limits tax increases to no more than 5 percent annually and also sets limits on the city's bonding authority. But in the end, they say, 3Com will repay all the money and more. The complaints from residents have put the City Council in the uncomfortable position of altering the tax cap and angering voters, or picking a more expensive alternative that could scuttle the deal. If Rolling Meadows doesn't go forward with its original financing plan, the city and 3Com would have to rewrite their agreement to let Rolling Meadows spend more money on riskier bonds, City Manager William Barlow said Thursday. "This substantially changes the deal," Barlow said, "and (3Com) would be upset about that." Rick Friedman, 3Com's director of strategic planning, said Thursday that the company expects city officials will find a solution that won't threaten the deal. Rolling Meadows agreed to sell general obligation bonds to raise the money needed to finance the incentive package. The city has offered to pay for $2.5 million in road improvements around a vacant, 40-acre corporate campus once occupied by AT&T. An additional $200,000 would pay for the city's share of water, sewer and utility improvements. General obligation bonds are backed by the full faith and credit of the city. The bonds offer a favorable 5.1 percent interest rate that makes their total cost $4.8 million. But to issue general obligation bonds, the city would have to amend its tax-cap ordinance to exempt the debt of the 3Com bonds. Rolling Meadows could get around the tax cap by issuing riskier revenue bonds instead. But these bonds would be backed only by future revenue from the 3Com project. Potential bond buyers wouldn't have an ironclad repayment guarantee from the city. As a result, these bonds would carry a 6.4 percent interest rate, making the total cost of financing the 3Com project $6.7 million. In addition, this option would cost Rolling Meadows some of the $1 million it expects to receive over 20 years from a sales-tax split with 3Com. Relaxing the tax cap for the 3Com deal "makes good business sense," said Mayor Thomas Menzel. "It's something that's going to save us money in the long term." But the plan has angered some residents. Five years ago, Robert Gorsegner helped engineer overwhelming voter approval of a tax-cap referendum proposal. Now, he says, he will work to put another proposal on the ballot in 1998 if the city alters its tax-cap law for the 3Com deal. Gorsegner's new proposal would ask residents to strip Rolling Meadows of its home-rule status, which allows the city to levy a sales tax and have more flexibility in governing. If Rolling Meadows didn't have home-rule authority, Gorsegner contends, the City Council would have to ask permission from voters each time it wanted to sell bonds to finance projects. "It would be more democratic. When they have these big expenditures--$3 million worth of bonds--they would have to come to the voters to make the decision," Gorsegner said. "They should either find another alternative to finance the 3Com deal, or they are forcing my hand to get this on the ballot." Residents granted the City Council home rule power in 1976. Rolling Meadows' population still does not meet the 25,000 required for automatic home rule. Aldermen will consider amending the tax-cap law at their Tuesday meeting. "Does it violate the spirit of the tax cap? No. Does it violate the letter of the tax cap? Yes," said Ald. Merton Staley (2nd). "I would have to say that I'm more influenced by the spirit than by the letter." If the city goes ahead with its plan, officials say, Rolling Meadows will get back all its upfront money and won't have to raise any taxes. Over the next 20 years, 3Com must repay the $2.7 million and all debt associated with the bonds. The money will come through increased sales-tax revenue that Rolling Meadows will receive from having 3Com in town. Even if 3Com doesn't generate enough money from sales taxes, it still must pay off the bonds, according to the agreement. "This is not a major departure from the wishes of the taxpayers when they voted for the tax-cap referendum," Barlow said. "The idea was to keep property taxes low. We've been able to achieve that through economic development. Bringing in 3Com will allow us to grow the tax base significantly." Once 3Com pays off the bonds, the company and the city will share sales tax revenue generated by 3Com. o~~~ O