DeKalb TIF Standoff Over – For Now

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A showdown between the DeKalb City Council and a coalition of citizens, taxing bodies and the DeKalb County State’s Attorney’s Office seems to have worked itself out—for now.

When the City Council proposed creating a third TIF district in November, concerns were raised about how past TIF money was spent and several concerned citizens called for a forensic audit to look into the City’s past TIF appropriations. The creation of the TIF 3 was tabled while discussions ensued.

Subsequently, DeKalb County State’s Attorney, Rick Amato, wrote two letters to DeKalb Mayor, Jerry Smith, calling for a freeze of TIF funds until a forensic audit of past TIF expenditures could be completed. He was supported in that demand by DeKalb School District 428, the DeKalb County Board and a group of vocal citizens that included former DeKalb Mayor, Bessie Chronopoulos.

Faced with TIF 2 expiring on December 31, 2018 and having to release the $11.25 million surplus funds back to the other taxing bodies, the City Council voted in a special meeting on Tuesday to green light three proposed development projects—renovation and air conditioning for the Egyptian Theatre, further development of Hometown Sports Bar & Grill, and redevelopment of the former St. Mary’s Hospital into a boutique hotel. They also approved the 2019 City budget and the hiring of Bill Nicklas as the new City Manager.

Interim City Manager Raymond Munch said Wednesday that the $5.6 million remaining after the three approved projects will be declared surplus and distributed to the other taxing bodies. The City Council also approved $100,000 to be taken out of both TIF 1 and TIF 2 to fund forensic audits of each.

DeKalb County State’s Attorney, Rick Amato

On Monday, Amato moderated a County TIF meeting that was surrounded by controversy before it even began. The DeKalb Township wrote a letter to Amato informing him that they would not be attending, because they believed the meeting did not meet the legal requirements of the Open Meetings Act (OMA). This was based on the fact that only the City of DeKalb can legally post meetings of the Joint Review Board (JRB) and they had not yet posted anything about Monday’s meeting.

After working out the OMA concerns, the County TIF meeting convened and lasted for over an hour, with Amato and David Berault from the State’s Attorney’s Office and DeKalb School District Attorney, Gino Galuzzo, addressing the audience first.

Amato said that a forensic audit of DeKalb’s TIF practices is needed because “too much has gone on” and “too many questions have occurred without an answer.”

“We’re not saying there’s criminal activity. We’re not saying they’re civilly wrong,” said Amato. “But there’s questions that we need to learn from and knowledge we need to acquire from that audit.”

“The dollar amount is not where the problem is; it’s been the process,” said Amato. “We need to know where we came from, so we can avoid that going into the new TIF.”

What Amato specifically proposed was that the DeKalb County State’s Attorney’s Office hire an audit company and oversee the forensic audit, and that funds from TIF 1 be used to pay for the audit. Once the audit is completed, he suggested, they would convene another public meeting or a press conference to share the results with the public.

As far as the reason for setting up Monday’s meeting, Amato explained, “This is a conversation about accountability and letting your public speak, and getting the public to where they need to be and to be informed.”

Among the concerns that Amato brought up at the meeting were:

  • Over $11 million of funds were paid to administrative costs for the TIFs.
  • The City offered to give the taxing bodies $11 million if they agreed not to investigate how the TIF funds were administered in the past. If they didn’t agree to that, then the city would spend down all of the funds and the other taxing districts would get nothing.
  • “Every time we sit and looked at the numbers, they’ve changed.”
  • The four TIF project proposals by the City Council amount to a “cash dump” and is not the right thing to do at this time.
Gino Galluzzo

After Amato spoke, he turned the microphone over to Galluzzo, Attorney for the DeKalb School District. Galluzzo spoke about their concerns about what will be done with the TIF surplus dollars, and especially if there is going to be a third TIF district, since the TIFs last for 23 years or more (with an extension).

Galluzzo said that he supported a government transparency ordinance.

Kurt Thurmaier, NIU Professor, wondered why nobody was looking into TIF administrative costs over the last 20 years. He believed this was just a money grab by the school district because they are hurting for revenue. He said we just need to move on and focus on how we’re going to work together going forward.

David Jacobson

David Jacobson, DeKalb 1st Ward Alderman, called out Galluzzo and the DeKalb School District. Jacobson said that he had questioned some of the TIF administrative expenditures over the years and thought the City relied on TIF funds too much, but pointed out that none of the JRB members had raised any concerns previously. He suggested that the timing of these accusations was an attempt to delay the funds being spent so they would be abated back to the other taxing bodies.

“At no point in the last eight years, or in the last twenty-three years, did any of the taxing bodies have any issue with how the money was being spent,” said Jacobson.

Jacobson said that now that there was a pool of funds, the other JRB taxing bodies are looking for one-time, very large cash payouts to go into their budgets as unrestricted funds that they can spend any way they like, “literally robbing it from development.”

Jacobson accused the attorney from the school board of costing taxpayers hundreds of thousands of dollars by making these accusations. “This is an investment by the school board to go after millions of dollars that they can spend,” Jacobson said.

He further said that an annual report has been given to the JRB every year to show what the money was spent on, and that a forensic audit will just tell them what they already know.

To counter Amato’s “cash dump” accusation, he pointed out that the current TIF projects being proposed had already been vetted by the City Council.

Galluzzo’s response to Jacobson was that in recent years there has been about a million dollars a year on the TIF reports under the administrative identification that simply says “transfer to general fund.”

“The law allows you to transfer funds for administrative costs, but you have to prove that those were costs you wouldn’t have had if you didn’t have the TIF,” said Galluzzo. “When you’re transferring a million dollars…what specifically was that million dollars a year used for to benefit the TIF?”

A number of other people spoke at the public hearing to express their support for a forensic audit of the TIF funds, including current Chairman of the County Board, Mark Pietrowski, former DeKalb Mayor, Bessie Chronopoulos, current County Board member, Misty Haji-Sheikh and former City Clerk and Alderman, Steve Kapitan.

Some other concerns raised by those who spoke at the meeting included:

  • Herb Rubin was upset that City staff had come up with a “reasonable set of proposals” for getting consensus on future TIF projects, but they got postponed until January and were not used on the four proposed projects that were voted on at the December 18th City Council meeting.
  • Michael Haji-Sheikh, NIU Professor, said he has personally seen evidence of TIF abuse on a survey of the university lagoon and is concerned that TIF has been used as a slush fund for pet projects. He said that TIF spending has been “fuzzed up” to confuse people over the years.
  • Kapitan said TIFs are only supposed to last as long as it takes to meet the goals of the TIF. When TIF goals are too broad and they last decades, it can become a slush fund for the City.
  • Misty Haji-Sheikh said there has been a lack of information for the citizens on how their tax money has been spent. She and others had submitted FOIA requests and never got their requested information.
  • Someone else wondered if it has been proven that the TIF projects have actually benefited the community.

For video of the entire 12/17/18 County TIF Meeting and the 12/18/18 Special City Council Meeting, see below.

Video of complete 12/17/18 County TIF Meeting:

Video of complete 12/18/18 Special City Council Meeting:

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