The governor’s proposal to make huge cuts in funding to state universities is the big news today, but municipalities are facing a similar threat.

At Monday’s council meeting, DeKalb’s finance director will present the mid-year budget report. The city appears to be pretty much on target for the current fiscal year, but administrators are concerned about possible future cuts to DeKalb’s share of the state income tax (see p. 26) if the governor gets the budget he wants.

Income tax started out on pace at the beginning of the year and has slowly fallen behind budgeted dollar expectations. Dollars are projected to come in slightly below budget at $4.15 million. Please note this revenue source is a part of the Local Government Distributive Fund (LGDF) which is currently collected and disbursed by the State of Illinois based on a per capita basis. With a new Governor, there has been discussion about perhaps eliminated [sic] these funds or changing the distribution allocation.

The current budget proposal doesn’t eliminate the income tax LGDF, but if passed would halve it. The impact on a given municipality would depend on how much of its budget depends on income tax. In DeKalb’s case it makes up about 12.5% of the operating budget so its absence would definitely cause pain.

This is not the first time a governor has targeted income tax payments to municipalities, and I identified this vulnerability as early as 2010. Even if we dodge the bullet this year, we should start talking about how to reduce dependence on this revenue source for funding operations.

Related: “Budget Addresses Have Consequences” at the Capitol Fax.

The city council voted Monday on a measure to waive the customary bidding process and award a contract to out-of-towners for a new custom website. Staff insisted only CivicPlus could make DeKalb’s official website comply with Americans with Disabilities Act (ADA) rules within a 4-month deadline negotiated with the U.S. Department of Justice.

Some city employees, including the city manager, have worked with CivicPlus previously and elsewhere.

Some city residents have questions about this deal and Bessie Chronopoulos offered a list of hers in a letter to the editor. Read the rest of this entry

I placed a couple links and short comments on these topics with the Facebook Group in case anyone feels chatty this weekend.

Remember Mark Todd? He’s the former VP of Farmers and Traders State Bank in Shabbona who got himself appointed DeKalb County Treasurer, ran unopposed for the same office as the bank failed, and then resigned to move to Hawaii.

The Federal Deposit Insurance Corporation (FDIC) is just finishing up with him.

The FDIC considered the matter and determined it had reason to believe that:

(a) The Respondent has engaged or participated in violations, unsafe or unsound banking practices, and/or breaches of fiduciary duty as an institution-affiliated party of Farmers’ and Traders’ State Bank, Shabbona, Illinois (“Bank”);

(b) By reason of such violations, practices acid/or breaches of fiduciary duty, the Bank has suffered financial loss or other damage, the interests of the Bank’s depositors have been or could be prejudiced, and Respondent has received financial gain or other benefit; and

(c) Such violations, practices and/or breaches of fiduciary duty involve personal dishonesty on the part of the Respondent or demonstrate the Respondent’s willful or continuing disregard for the safety or soundness of the Bank.

The FDIC further determined that such violations, practices and/or breaches of fiduciary duty demonstrate the Respondent’s unfitness to serve as a director, office, person participating in the conduct of the affairs, or as an institution-affiliated party, of the Bank, any other insured depository institution, or any other agency or organization enumerated in section 8(e)(7)(A) of the Act, 12 U.S.C. § 1818(e)(7)(A).

Todd has waived his right to a hearing on the above allegations and entered into an agreement with FDIC that he is prohibited (except with express written permission from FDIC) from “participating in any manner in the conduct of the affairs of any financial institution or organization” including voting for directors and so on.

To read the prohibition order yourself, go here to find and download the PDF file.

**Update** 1/26. Related: “Sales tax coffers could get boost with new law”. Discusses the Marketplace Fairness Act and its impact (if it ever passes the U.S. House) on state revenues.
**Update** 1 p.m. Related: “Now comes the Internet Sales Consultants”. It provides more food for thought on this scheme, as well as a description of an omission that sounds like a possible violation of the Open Meetings Act.

DeKalb’s city council is considering a new kind of retail revenue source. You should know about it because your tax money is involved.

Chronicle:

City leaders are trying to lure Internet retailers with an 85 percent sales-tax rebate.

The first step in the coaxing process came Monday when aldermen unanimously approved an agreement with a shell company called Great Lakes Economic Development LLC.

The company was created by Tom McPeak, a partner with Atlanta-based Barnwell Consulting, who said he has an undisclosed client interested in setting up shop in DeKalb.

McPeak is an acquaintance of Roger Hopkins. Hopkins used to head the DeKalb County Economic Development Corporation, and after that contracted with the city to provide economic development services for a time. And it looks like he’s done us a solid in facilitating an introduction.

Let’s take a closer look at the potential in this gift. Read the rest of this entry

A few days ago in another post I said this:

Fine/fee revenue can be highly variable, as we’ve seen with the disappearance of building permit revenues. TIF districts have time limits and both of ours expire at the end of the decade. These are appropriate sources for making capital improvements as you can. They are not meant to cover permanent, fixed costs yet that is exactly what is happening.

That post ran long, so I saved elaboration on the above point for another day. But now I’ve picked it back up with a vengeance. Read the rest of this entry

The City of DeKalb released its FY2014 Comprehensive Annual Financial Report last month, and as usual there’s plenty to digest. A large part of this report draws data from supplemental reports found in the back of the CAFR, some of which track the past 10 fiscal years and are therefore useful for understanding the lingering effects of the Great Recession on the local economy.

First up, I’ve prepared a chart of taxable sales. Retail sales taxes make up more than 40% of DeKalb’s operating budget — no other single revenue category comes close — so sales and the taxes they generate are important indicators of economic health.

The advantage of looking at the sales themselves instead of the tax revenues is that you don’t have to account for sales tax hikes, abatement deals and other “noise” in the data.

dyerware.com


Of course there’s a lot of overlap between state and local sales, but showing them both underscores the trend, which is this: Taxable sales have stabilized since 2009, but they’ve more or less stabilized at 2005 levels.

And it’s not just retail sales that have stagnated. DeKalb’s share of the state income tax is climbing, but so far has only made it back to 2008 levels. Utility tax revenue totals for FY2014 were less than FY2012’s.

Water sales were down by 5.2%. If you think about the combo of utilities and water falling, it seems likely that it can’t all be about plugging leaks and conservation. DeKalb’s likely still losing population.

City government, however, is bucking that trend. Read the rest of this entry

Overtime comprised most of DeKalb PD’s excessive spending over budgeted amounts for FY2014, but another major culprit was spending in the “Commodities” category that came to roughly twice as much as the $260,000 budgeted.

Commodities were clearly under-budgeted in 7 of 10 accounts in that category and in a couple cases downright unrealistically. For example, actual costs for gas, oil and antifreeze for that department came in a bit over $117,000 for FY2013, yet PD budgeted only $95,000 for the same item the following year.

What’s going on? My guess is that the decision to return expenses from off-budget accounts back into the department’s budget accounts was an unexpected development.

Fortunately, spending for general government was lower than budgeted and this partially offset the excessive spending on public safety, leaving the city at a mere $347,773 over its General Fund budget for the year.

Resources:

City of DeKalb FY2015 Budget

Comprehensive Annual Financial Report for Fiscal Year 2014

Auditor’s Letter to Management (see p. 6 of the PDF)

City of DeKalb’s Downloads Page (Look under the Finance heading for annual budgets and CAFRs)

Airport Operating Deficits

The Comprehensive Annual Financial Report (CAFR) for FY2014 is out. So far the document is only accessible as part of the December 8 council meeting agenda, but at some point will probably appear on the city’s downloads page under the Finance title.

Let’s stick a toe in by first visiting the DeKalb Taylor Municipal Airport (DTMA) annual operating deficits:

FY2006: $467,332
FY2007: $720,557
FY2008: $645,131
FY2009: $778,324
FY2010: $524,272
FY2011: $681,713
FY2012: $413,576
FY2013: $491,217
FY2014: $491,997

The city has to make up for the deficits using tax money that would otherwise go to general operations.

Thoughts:

DTMA took on fuel sales a couple years ago, and all of its hangar space is rented out (PDF p. 143). I do not know whether the city has recently compared rental rates with other airports, but if not that might be a good next step to ensure that taxpayers aren’t subsidizing operations any more than they have to.

Another Jail Referendum? Really?

Déjà vu. DeKalb County Board is considering placing a proposed sales tax increase on the ballot next spring, for…an improved jail.

“What I plan to do is on the county board meeting on Dec. 17 is to review where we’re at with the jail expansion and some options for where we might go, one of those options being whether we go for referendum,” [County Administrator Gary] Hanson said.

Never mind that they’ve told us ad nauseam about how the tipping fees from the landfill expansion will pay for the jail expansion.

What changed?

[The landfill tipping] fees are estimated to total about $2.2 million a year, with about $1.9 million being available for the jail expansion project.

But that also is what the county would lose if Sycamore’s sales tax agreements with two airline fuel-purchasing companies collapses under a legal challenge from the Regional Transportation Authority, which is arguing that the companies don’t actually buy the fuel in Sycamore.

Boo-effin’ hoo.

When the airlines set up shop in Sycamore about 10 years ago, it doubled the county’s annual sales tax take from $2 million to $4 million.

Did you hear all the discussion back then about how to use the extra $2 million? Me neither. The jail expansion project was apparently not important enough to get a piece of the windfall.

And windfall it most certainly is: So much money was coming from just two companies, and they made it clear during the referendum discussion of 2006 that they would leave for cheaper pastures if the county tried to apply any sales tax increases to them. They have no loyalty to DeKalb County.

Nevertheless, instead of setting aside a stream that — clearly — could disappear at a moment’s notice, the county quietly absorbed the extra revenue into operations faster than a Bounty® brand towel.

Do we really want to reward this kind of shortsightedness?