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August 9, 2022

County Government Power to Borrow – Shelby County Update

By Kirk Allen & John Kraft

On March 29, 2021

Illinois (ECWd) –

We recently published this article regarding a county government’s power as it relates to borrowing money.  Within that article was the video from the meeting in which justifications were made for borrowing, however, none of those cited the applicable statute as was pointed out.

As more people are reading the provided AG opinions, it appears many have overlooked the key language in the opinions as well as current law.  The focus needs to first be on the power given, then whether or not such power would permit borrowing and what type of borrowing.

The Shelby County State’s Attorney has recently and correctly pointed to the applicable county code on borrowing and even highlighted a very key portion of that law that many are overlooking.  We appreciate that she put that section in bold, as we did below, our emphasis in red.

(55 ILCS 5/5-1135)
    Sec. 5-1135. Borrowing from financial institutions. The county board of a county may borrow money for any corporate purpose from any bank or other financial institution provided such money shall be repaid within 2 years from the time the money is borrowed. The county board chairman or county executive, as the case may be, shall execute a promissory note or similar debt instrument, but not a bond, to evidence the indebtedness incurred by the borrowing. The obligation to make the payments due under the promissory note or other debt instrument shall be a lawful direct general obligation of the county payable from the general funds of the county and such other sources of payment as are otherwise lawfully available. The promissory note or other debt instrument shall be authorized by an ordinance passed by the county board and shall be valid whether or not an appropriation with respect to that ordinance is included in any annual or supplemental appropriation adopted by the county board. The indebtedness incurred under this Section, when aggregated with the existing indebtedness of the county, may not exceed any debt limitation otherwise provided for by law. “Financial institution” means any bank subject to the Illinois Banking Act, any savings and loan association subject to the Illinois Savings and Loan Act of 1985, any savings bank subject to the Savings Bank Act, any credit union subject to the Illinois Credit Union Act, and any federally chartered commercial bank, savings and loan association, savings bank, or credit union organized and operated in this State pursuant to the laws of the United States.
(Source: P.A. 98-525, eff. 8-23-13; 98-756, eff. 7-16-14.)

The State’s Attorney has stated, just as the AG has stated, a county cannot lease its farm ground.  The reason is that there is no public purpose.  The effort to “license” the farm is now being contemplated which raises a whole new question.  Can the County license farm ground?  While we have seen the opinion provided by a law firm supposedly contracted by the Appellate prosecutors, there are numerous holes in that opinion, in our opinion. We say supposedly contracted because we find the law allowing the appellate prosecutor to contract has very strict limitations and getting an opinion for a county State’s Attorney is not one of those outlined in the law.

Within numerous opinions from the Attorney General, there is a common theme quoted and it is our opinion that theme is being overlooked as it relates to a county going into the farming business.

“Accordingly, a county cannot contract with an individual or private association or corporation to do something which the county has no authority to undertake.”

What authority is given to a county to go into the business of farming? That question must first be answered before addressing any other question.

Or should we ask, what power is given for a county to license or franchise community antenna television systems?  We ask because there is a parallel that can be drawn on the farming issue.  According to a 1974 AG opinion, no such power existed for a county to license or franchise a community antenna television system.

Presently, counties have been given no express statutory authority to license or franchise community antenna television systems ( CATV).”

However, the keyword in that opinion that must be paid attention to is, “Presently”, much like the keywords in the county code on borrowing must be paid attention to, “for any corporate purpose”. 

Looking at the powers given to the County, it is clear under 55 ICLS 5/5-1005, power was given as it relates to leasing space on a telecommunications tower to a public or private entity.  Note it says public OR private.  That power was given in Public Act 95-813 and was effective on 8/16/2007.

The  AG opinions on borrowing all explain the reasons for the opinions at the time and those to had a common theme.

“* * * This provision does not grant authority to counties to undertake functions, programs, or activities without other authority. It only provides a method of performing such functions, programs or activities authorized by other provisions of law. It is, therefore, necessary to find the statutory authority for the county to undertake the functions contemplated. * * *”

Necessary to find the statutory authority for the county to undertake the functions contemplated.

The opinions provided to date in Shelby County attempt to justify why the county can “license” someone to manage the farm for them. They appear to miss the mark on the common theme from the Attorney General, which is they must first begin with the statutory authority to undertake the functions contemplated, in this case, farming.  If the county had the statutory authority to license farm ground, like was given with a telecommunications tower, then they could undertake the functions or activity of that authority.

Fast forward to 2014, the county was given the power to borrow but only for a corporate purpose. What are those purposes?  They are spelled out in the county code, called powers, as in specific powers. Much like the Attorney General pointed out in the 1974 opinion, we still can’t find any power given for a county to go into the farming business.  If such power existed, as it does for leasing space on a telecommunication tower, then that would be a corporate power which they could then borrow money under the guidelines in the law that became effective in 2014.

While we are confident the State’s Attorney will never concede the position she has taken, we would encourage the County Board to request an opinion from the Attorney General on the licensing of the management of the farm ground to a bank.  We are confident any such opinion would conflict with the position currently held by the County State’s Attorney.

 

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15 Comments
  • Homer
    Posted at 17:40h, 29 March

    So cash renting the farm ground to a farmer at 250 to 300 dollars an acre which would bring good money to the county is no public use someday tell the whole story which I’m sure you wont

    • John Kraft
      Posted at 18:02h, 29 March

      It is not permitted by the Counties Code. Don’t like the law, get it changed.

      • Homer
        Posted at 19:54h, 29 March

        The county should be able to go to f s a office sign up for pollinator program and move on there would be a cost at first but after that it would be income

    • Kirk Allen
      Posted at 08:39h, 30 March

      Why are you sure we won’t tell the whole story? What part of this story has not been told? The Attorney General spells out why renting farm ground to a private farmer does not serve a public purpose. That is their opinion and we have found nothing to contradict that, included case law on similar matters. No one questions that it brought good money to the County. What was questioned was the legality of how it is being done. While we appreciate your thinking it brings in 250 to 300 an acre your way off the chart on what was reality in Shelby County. I seem to recall it was $150 an acre but would have to go back and look at the agreement to be sure.

      • Homer
        Posted at 11:47h, 30 March

        Kirk I would bet there’s more you guys and Brad Holbrook have some reason other than the county trying to make money you don’t do what you do for free twice I have asked you who is the 3 watchdog so I know there’s more to every story and believe me I will see a friend who lives there and he will tell me more

        • Kirk Allen
          Posted at 12:16h, 30 March

          What is your question? Our 990’s are public records and you will see we do not receive any compensation for our work at Edgar County Watchdogs. When you say who is the 3 watchdogs, im not sure what your really asking? John and I are the only officers of ECWd involved in doing investigations and publication of our findings. Ask the question and we will answer within certain limits because some things have to remain confidential, such as who donates to our efforts. Those are protected by law and for good reason.

          • homer
            Posted at 15:59h, 30 March

            not too long ago in an interview you did you said edgar county watchdogs was made up of 3 people just asking who is the third you mentioned in your interview

          • Kirk Allen
            Posted at 16:11h, 30 March

            There are three people who make up the Board of Directors. John and I are the only two that do investigative work and write articles. The third is public record with the Secretary of State. Sid Justice is his name.

      • Aaron
        Posted at 17:30h, 03 April

        Rent is $250ish in Clark county and Shelby county soil is better so 250 to 300 is about right. If not, someone is getting quite a deal

        • Kirk Allen
          Posted at 18:23h, 03 April

          They were getting a hell of a deal.

  • PK
    Posted at 01:46h, 30 March

    The county could lease the ground to the Shelbyville School District/local FFA chapter, I believe. Therein, the public purpose is clear.

    Property tax obligation in that scenario?

    • PK
      Posted at 12:08h, 30 March

      Due to real estate tax distribution, exempting the ground from real estate tax would not be fair to other townships in the county nor would the department of revenue be participating. Also, the school district is exempted. Therefore, the county would have the property tax obligation, I believe.

      • PK
        Posted at 12:12h, 30 March

        While such a lease agreement might not garner the most revenue for the county, it would still make for a pretty damn wise investment.

        • Kirk Allen
          Posted at 12:23h, 30 March

          From a private business standpoint, totally agree. From a public body standpoint, it violates the law. So what should be done? Ignore the law and do as they please – slippery slope, or change the law?

          • PK
            Posted at 13:41h, 30 March

            Again, leasing to the school district/FFA chapter would be a public purpose. What am I missing? Else there’s no disagreement.

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