6 Banks Rebuff City Financing Proposal; Sole Bid Accepted

With only one choice, the selection of a bank to supply the city with bridge financing for the Alton Parkway project was an easy decision for the Lake Forest City Council.

Of seven banks offered the chance to bid to supply the financing, only one agreed to do so, City Manager Robert Dunek said at Tuesday night's meeting.

The bid solicitation process concluded in "some interesting news and good news,” Dunek said Tuesday night.

The good news was that the sole bid, which came from Bank of America Merrill Lynch, had an interest rate lower than the city expected to have to pay.

The bank offered 3.99 percent; the city had expected to pay 4.5 percent, which amounts to $540,000 less over the 15-year loan term.

Overall, the loan will cost the city $13.9 million to pay back entirely, including principal and interest, over 15 years.

The city will get $10,988,000, with approximately $880,000 of that already slated for capitalized interest, consultant James Fabian said.

Dunek's interesting news, of course, was that six banks rejected the offer outright.

Several of the banks said the term requested—15 or 20 years—was too long, according to Fabian.

Others declined to bid because they did not think the parks that the city is putting up as collateral are worth it. Parks are at the "lower end of the essentiality spectrum," Fabian said. Another concern was the amount of money the city is seeking, which could "limit the investors that they can use for the loan," he added.

The city can pay it back before the term is up, but there will be a penalty that it still under negotiation with the bank, he added. 

In the agreement, there is a two-year delay before the city has to begin interest payments to allow developers fees to begin rolling, Dunek said.

Councilman Scott Voigts said he was in favor of accepting the bid, since the Alton Parkway project is a “necessity” and the planned sports park, which will also benefit from the borrowed funds, is important to the city.

The council voted 4-0 in favor of the bid, with Councilwoman Kathryn McCullough abstaining.