Council Watch: Paying for the Police Station

Council takes up the question of police station financing again Monday. The plan is to figure out how to raise an additional $450,000 per year to meet annual debt payments on a $17 million station. They’ve narrowed their options here, which would be the logical thing to do if they were all on the same page, but some members are balking at further tax increases. If they refuse to raise the property tax rate or to impose a higher water meter surcharge, what happens next?

Seems to me some questions would be in order, such as how the proposed 55,000 square feet is to be used, or what we could get for $750,000 per year, or why Sycamore seems not to be having any problem building onto their station. But that’s just me. What say you?

25 thoughts on “Council Watch: Paying for the Police Station”

  1. On the Chronicle site they are talking about the financial consultant. Everybody’s going crazy (like usual) and saying how this is a waste of money, a bad decision because of the ecnomy, etc.

    How soon we forget that just a few meetings ago there was a petition presented to bring in independent people to review the city’s accounts. I imagine a lot of those same people were very much in favor of that then as well. Were they expecting some firm to do this for free?

  2. The design of the Sycamore PD is a different design than DeKalb City Hall. A lot of work was completed when Sycamore moved their chambers and offices out of this building and made it specifically for the police and fire departments. I do also believe that the Sycamore building is actually built a bit better.

  3. I will say it again. The need for a new police station is clearly there. There is no need for TIF-paid things such as a fake ice rink, a Taj Mahal parking lot, and a Taj Mahal Locust Street. At the last meeting, the Council passed out TIF money for projects like it was Halloween candy.

    The need for a new police station is there. The fluff projects with TIF money need the brakes placed on them. We need a Taj Mahal Locust Street in this economy like we need diamond-souled shoes.

  4. Mac’s letter.

    Glad you brought up the lease-sale option again as it deserves way more discussion than it’s gotten so far.

    I also see a contract with a financial consultant as a vote of no confidence in administrators, IMO exactly what the petitioners were saying. When it comes to Council, the real choice is whether to retain them.

  5. The lease-sale option has been used locally, by NIU to build the Northern View residential complex and the Dept of Public Administration/IASBO building, and by the County to build the senior housing complex on Dresser. I was not given an explanation for why that suggestion was rejected.

    The expectation of the falling state and local property tax revenues is affecting the ability of state and local governments to finance their operations/projects through bond sales. There are far more munibond sellers than buyers and many of those buyers are taking huge hits in their portfolios due to their investments in the subprime market and securitization of low income mortgagees assets which were nonexistant beyond the paper they were written on.

    An exact answer to the specific question on muni interest rates we can expect and what our threshold or cap is on interest costs must be given.

    Under the “that’s the way we’ve always done it” policy mentality it is said that property taxes are the most secure debt asset for public finance. I’ve been arguing against that mentality. Who pays the property tax on a foreclosed home? What exemptions and/or assessment are granted to the new title holder? Since banks aren’t loaning money when will taxpayers figure out that delinquent property tax buyers are the new lenders? What happens when there are more tax sales than buyers? And, since tax obligation bonds require that the rate rises to meet the debt, what happens when taxpayers simply cannot afford their bill?

    City council is about to approve a $17 plus $3 million debt obligation without seeing as much as a footprint land use drawing, much less an architectural rendering. From what I understand a Construction Manager has already been chosen. Is that correct Ivan? Pevo?

    Tax spenders who

  6. Tax spenders who think they can assess home values based on their need should be named individually in a class action suit based on the legal and court recognized method of property value: A willing seller and a willing buyer.

  7. I recently spoke with Donald Crawford who was the city manager of DeKalb when the current city hall/police station was built. He told me that it was designed to be expanded to the East, and also that it could have additional floors added on top. I, too would like to know why the cost keeps going up. One would think that in the current economic climate some economies might be made.

  8. Way, way off topic:

    For free entertainment, on PBS Channel 11 on Wednesday, Oct. 29 at 8:00 p.m., there will be a documentary on the Lincoln Highway. The producers sent me an advance copy and I watched about half so far. I think it helps give perspective to what a great historical resource we have in DeKalb. For full disclosure, I appear twice, as an ‘extra’ blending into the background in Wyoming.

  9. Mac,
    Technical question? isn’t the northern view project a tax credit project. If so private developer would get huge tax advantages that a nonprofit like the university couldn’t get, hence building it as a lease-purchase.

    herb
    as i posted on mac’s blog, I’ve advocated for stalling the project until the economic climate stabilizes

  10. Mac

    I cannot speak for the entire Police Facility Committee on why Lease-Sale suggestion was rejected but can only state why I did not think it was worth pursueing. Many of these are just my personal opinions and not based on any real “hard evidence” So here we go.

    1) Would I be beter off to own my home or rent a house? I think I am better off to own so I concluded it would be better off if the City was the owner of the Police Station rather thatn leasing it from someone else.

    2) Would I be better off the lease a vehicle or own it? Every financial advisior I have every heard of stated that one is better of to own than lease.

    3) If a third party is involved then they are in it to make money. Why should tax dollars be diverted to make a profit for someone else.

    4) The differance between the lease payments and the ” mortgage payments” are about the same so why not own rather than lease.

    5) I did check with a large operations manager in the suburbs as to why many corporations build, sell then lease back the buildings. The explanation I was given is that they often do this because of the uncertainty of how long they will remain in a given location. Since their is no reason to believe that the DeKalb Police Department will relocate out of the city I see little value in not being the owner of the building and land.

    6) Finally I considered what would happen if the developer went backrupt, or just wanted to pull out, in the middle of the project. Kind of like the half built housing projects in Cortland, Waterman and many other communities What we we be stuck with then.

    All of this is based on the premiss that a Police Faciliy is a very specialzed building. As an example adjacent interview rooms can be built cheaper using wood frame and drywall when soild block or cement in needed to prevent separate suspects from listening in on each other.

    How much quality would the developer be willing to cut when building he facility to come in under budget or show a greater profit?

    Mac. These may not be valid reasons or ever correct assumptions on my part but it is what I based my own opinion on when decided agaianst the sale lease option for this building project. I do hope, however, that this is an explanation for you as to why I decided the way I did.

    Pevo

  11. Pevo’s Part II

    The discussion and decision Monday not is not a financial decision but rather a political decision. In my opinion this is why.

    Anytime the council decides what to tax one group of people in relation to another group of people that decision is political rather than financial.

    I will give examples of what I have heard discussed at prior meetings.

    Baker stated that the council promised never to raise the sales tax above 10%. To me that is a political statement rather than a financial statement.

    One member feeels that the entire project should be funded by property taxes. To me that is a political statement catering to those students who do not own property in DeKalb

    One alderman is opposed to raising the R & B tax to pay for the station. To me that is a political statement catering to the hospitality industry.

    It appears in the last budget raises totalling 1.2million were given out instead of using the 1.2 million to pay for this project. One can argue the raises were given to appease the employees and this was political rather than financial.

    In 2011 the TIF sales tax expires and 1.3 million will return to the general fund. These funds could go towards the the building of the Police Station but it appears politically they have been promissed for other projects.

    The entire 1.3 millions could be raised by sales tax increases but when the business’ complain they apply political pressure to oppose such increases.

    It appears the Police union contract expires Dec 31, 2008. It also appears the council needs about 450k to fund the station. How about a wage and benefit freeze for the police union. They all vote so that would become a political decision rather than a financial decision.

    I could go on and on and on with examples of the priorities that face the council in this decision. Me feeling is that they have reached the point that the real decision on how to fund this facility is no,longer financial but it has now moved to the polotical arena.

    The need for the facility is great. Everyone agress with that. The decision they are struggling with is who and how to tax and that is a political decision not a financial one. Each of the alderpeople have different voters that they respond to and it appears they have all made differant promisses to their voters ( IE I promiss never to raise the sales tax over 10%) The point I am making is that the decison process in no longer financial it is now political.

    All the committees in the world will not make this decision any easier for the council. The need and financials are clear. The decision is now which group of voters pays for this.

    Pevo

    P. S. The Police Facility Committee recommended that the cost be split between Property owners, users and visitors to the city. The property owners ( or residents) would pay via a water meter charge, Users by increased fines and fees and visitors by an increase in R&B taxes. This facility would be paid for by everyone: property owners, users, visitiors students: everyone inculded, no one excluded

    We also realized that political pressure would be put on the council from sources within all three of these aforementioned groups.

    In my opinion that is the dilemma facing the council now. Having to choose between equally undesireable options the council will take the path of least resistance and do nothing thus putting off the decision for another time by tabling this issue. In my opinion this is the worst path to take but the one with the best political cover so that is what will be done.

    With respect to all
    Pevo ( without spell check sorry)

  12. We do need a new police station. Have I told the story of the abused woman who had trouble giving a statement to the police officer because the cramped area did not feel right, and there were people coming in and out? The physical layout of the cramped police station failed to serve this woman.

    We ‘need’ a re-done Locust Street, a fake ice rink, a purchased then torn down Ralph’s, a Taj Mahal parking lot, a new walkway in between buildings, purchased then torn down First and Locust properties, more money sunk into the airport, etc. like we need a hole in the head.

    The current Council knew there was a need for a police station yet they approved the TIF not all that long ago, and they approved the recent TIF expansion into the John Street area.

    If there is any delay in a new police station, then there should be delays in the TIF projects, just out of principal. It just does not look right to say we cannot afford a new police station yet there is money to blow on TIF projects we do not need.

    Hey Kids, if Home Rule gets revoked, can the TIF agreements get obliterated? If so, sign me up NOW!! If TIF is locked in for the next eon, then it is this Council who must take the responsibility.

  13. Here are prices for some not so old apartments owned by Laing:

    http://www.laingmanagement.com/ecopark2bed.htm

    So with Northern View, the rent coming in from the outside really helps offset the cost of building.

    If a new police station was done that way, there would be no outside revenue stream. There are only tax dollars and the only choices I see are from which pot(s) of tax dollars to use and when to build.

  14. Kay… The building that houses the NIU Dept of Public Administration and the Illinois Association of School Business Officials was also constructed using a lease-sale finance mechanism.

    The reason I recommended that option was due to the mix and match finance options that were being discussed. The munibond buyer would be told that their investment would be leveraged by real estate taxes. Other taxes and fees would be increased in an attempt to abate the property tax increase and attempt to share the burden between property owners, users and visitors. Politically speaking that sounds good.

    The property tax rate must be submitted prior to collection and accounting of “abating” revenue streams. Starting this December the Council would be required to inform the County of its property tax rate increase, wait until the collection of all of the other taxes and fees, weigh the difference and adjust the property tax rate the next December and start all over again.

    Since the City has not reduced its projected expenditures to a level below its projected revenue, as Rudy Espiritu has indicated, the city’s budget deficit will continue to grow beginning in 2011. As 2007-2008 exemplifies, there are extenuating circumstances (floods, snow, large insurance claims, recessions, etc.) that could arise as challenges to an already challenged budget. Keep in mind that the mix and match approach promises to the bond buyer, property tax, to the taxpayer 0 property tax increase. Financial obligation promises must be legally kept. Political promises?

    If the police facility is to be financed through debt bonds then property tax, exclusively, is the simplest, most transparent method. If other taxes and fees are to be used then a lease-sale is appropriate as it does not absolutely require bonds and there is more flexibility for revenue fluctuations.

  15. Pevo… I respectfully disagree with several of your points.

    First, what you are describing regarding leasing is not lease-sale construction financing. After the lease term, the City would own the police station outright. I very much appreciate your explanation of your decision making process. At least someone offered.

    If coded properly and the image appears, it is for illustrative purposes. It shows a small segment of the student residential West End, near the corner of Annie Glidden and Hillcrest. Casey’s is the property on the bottom right corner. It is the only one of the 31 tax parcels in the image that is not student residential. The total annual property tax for the parcels in this image is $717,514. These properties are owned by some familiar names in town. They’re good local people like you and I.

    But they don’t pay those property taxes out of their pockets from the goodness of their hearts. The students who live in those apartments pay the property tax. Yes, students pay property tax. The restaurants and bars don’t pay the R&B tax. Their customers do. Ditto sales tax. I submit that it is political to suggest otherwise. And it is political to suggest that the overwhelming majority of all of the taxes, except hotel, would be paid by anyone(s) other than the residents of this city. We in fact have sales tax leakage to other communities, that means our residents are making purchases in other communities. Based on hotel/motel tax revenues we also lag behind comparable others in overnight visitors. Local residents most assuredly will pay most of any and all tax increases.

  16. Lease purchase discussion is interesting on its own irrespective of the niu examples.

    But I think my understanding of the p.a. building is a bit different (Irene’s office was in that building). NIU could not get permission from the state to build or issue a state bond to replace several obsolete buildings that included P.A. The nonprofit in that building actually was the builder and not the university. The university is leasing space but with a very favorable contract in which the building reverts to NIU ownership in the distant future. Could be wrong on some of the details, but bottom line is Niu couldn’t get the building done on its on as permission to build or bond on its own weren’t given by the deities in the state and had to rely on these complicated mechanism.

    On the police funding: i still like the complicated multi-part proposal the mixed committee came up with. Withdrawing the r and b tax destroyed the proposal by putting a double whammy on the home owner with the utility and property tax. I have e-mailed on the issue and have had no impact as council is really divided.

    Herb

  17. Mac.

    Looks like we agree the discussion is more political than financial. Sometimes it is hard to compress all the thoughts after hours of meetings to a few short sentences.

    Yes I agree that R&B and Sales taxes are paid by the customer and many may be DeKalb residents but another point to remember is that these are taxes of choice where as Property tax is not really a matter of choice.

    As far as the lease sale option if I am wrong, I am wrong BUT I really think the issue is not how to build or how to finace but rather how to pay the bill. Whether the traditional bond selling approach is used or the sale lease method you describe is used the city is still going to pay and the problem they are facing is who to tax so that payment can be made.

    Pevo

    P.S
    I am trying to get on the DeKalb County site and keep getting a new password reset with instructions to reset my password. I cannot find where to do that on the site. Any ideas”??

  18. In 2001 (based on the 2000 value), the property taxes I paid were 8.05% of my take-home pay, after the state, the feds, etc. yank everything out. The property taxes I paid in 2008 (based on 2007) took 11.35% of my take-home pay. I do not get any cost of living increases, and obviously any salary increases I did receive from 2001 to 2008 did not keep up with the property taxes.

    Those are two ugly bills and there are only three months between June and September. Those bills are only going to get uglier when the school adds theirs. Rather than increase the property taxes for the police station, I would rather see that pain spread out throughout the year, using the various abatements as originally planned.

    I am not in favor of spreading out bond re-payment over 40 years because of the interest, though. I am currently trying to pay off my house early, and I already calculated that I could save a few thousand over the life of the loan if I pay it back sooner. I hope I am dead in 40 years but I would bet that between now and then, the city will want a couple more new buildings, and grandchildren would not want to still be paying off a police station.

    Entry level secretary/office managers in supervisory positions, often with small budgets to manage, at NIU start around $26,000 to $28,000. Entry level positions that require a bachelor’s degree often start around $28,000 to $30,000.

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