A couple of weeks ago, I submitted a Freedom of Information Act request regarding DeKalb’s practice of buying gift cards for employees, the latest round of which occurred in December 2015 when City of DeKalb spent $5,400 on “employee holiday gift cards” for some 230 city employees.
Among other things, the FOIA request asked for the following: “Records that indicate the cards were properly counted as compensation and that federal and state withholding occurred.” The response was as follows:
No responsive records have been identified. The City determined that in previous years, the cards were not included within taxable amounts. The City has worked to ensure strict compliance in prospective years by eliminating these gift cards from proposed budgets; there is no proposed expenditure in the draft FY16.5 budget that would include gift cards of this
nature. That change in practice was made after an internal review of this matter by the City earlier this year.
Read here for the IRS rules specific to de minimus fringe benefits when the employer is a government. Cash and cash equivalents — yeah, this means gift cards, too — cannot be excluded from income and are always taxable, regardless of amount.
Oops. That’s almost $16,000 in untaxed compensation since 2013, guys.
Also, since the city included no memos or other records of the elimination of gift cards for employees, we are free to assume that the “internal review” and elimination of the practice of giving gift cards occurred when administrators received my FOIA request dated April 21.
See the original FOIA request and response here.
It has come to my attention that clarification is needed on the post about the General Fund “special events” account named 8306.
If you contact City of DeKalb and they tell you that 8306 is for events such as helping with the expenses of July 4th festivities at Hopkins Park, that is 100% correct.
However, it is also correct to say that funds coded to expense account 8306 pay for employee events (parties and picnics) and special compensation (gift cards). The February 2016 expenditures report(p. 9), for example, included payouts for an employee potluck and a spree on gift cards for employees that’s becoming infamous. Read the rest of this entry
City of DeKalb has an account in its General Fund called “Special Events,” 8306 in the budget. I always thought special events were public events, such as the open house that was held for visitors to tour the new police station. Then I came across an expenditure of $5,400 for Target gift cards for employees that was coded to this expense account, which prompted me to look more closely. It appears to be an account that pays for employee parties and gifts.
Here are the amounts budgeted over the past few years from this account:
2012: $ 7,000
Even if all of the expenses are legit — and I’m not sure they are — the more-than-tripling of what’s budgeted into this account needs to be explained. I also note that the extravagance in this area comes on top of similarly large increases we’ve observed for membership dues/subscriptions and professional development expenses over the past 2-3 years.
But back to the question of legitimacy. Let’s consult the Illinois Constitution.
SECTION 1. GENERAL PROVISIONS
(a) Public funds, property or credit shall be used only for public purposes.
Are private parties and gifts for city employees a public purpose? I think not.
Yes, “is.” Emails obtained by Michael and Misty Haji-Sheikh of Preserve Our Neighborhoods show that even though collaborators ultimately rejected formal incorporation of College Town Partners in May 2014, the intention remained to suck sweet, sweet tax dollars out of City of DeKalb via Tax Increment Financing (not even getting into NIU and use of the NIU Foundation, though we definitely should at some point). There is no reason to believe the schemes were dropped, especially now that the mastermind has wormed his way onto the NIU Board of Trustees.
Yes, “schemes.” How else to describe the dreams of a local banker (and longtime Sanitary District trustee, by the way) to transform a college-adjacent neighborhood and get DeKalb to pay for the project. He apparently is so persuasive that the other officials involved, including our mayor and city manager, went along with him for months though their status absolutely precluded participation as partners in a private entity intent on spending public money over which they exert control. It was a gargantuan conflict of interest; we should find ourselves shaken by the apparent ignorance or disregard of their duties to the public while they spent oodles of staff time and other resources to bring them to the brink of a formal agreement without council’s prior authorization.
Indeed, we’ve not heard a peep of public discourse that hasn’t been tied to citizens’ dogged pursuit of information.
Click here to read the email indicating that College Town Partners might have been buried, but not outright killed. If the Shodeen people ever get their hotel and apartments approved, look for CTP to dig up the undead baby, give it a costume change and present it as the inevitable and desirable retail counterpart to Shodeen’s residential development.
Related post: Tim Struthers Gave DeKalb’s Mayor Talking Points When the College Town Partners Story Broke
Look at that nice, wide gap between General Fund revenues and expenditures during FY2011 and FY2012.
(All figures are actual as reported in annual city budgets, except FY2015 numbers are the end-of-year budget estimates and FY2016 are, of course, the projected amounts.)
What the gap represented was a huge reset of the operations (General Fund) budget that was accomplished by actively reducing the city’s workforce by some 20% on top of a couple years of attrition.
Mind you, we’d gone a couple rounds of tax and fee hikes by then, but it didn’t matter; city staff calculated at the time that if the reduction in force didn’t happen, we would be $5 million in the hole by the end of FY2011.
What the reset did was to fix the structural budget issue of personnel costs outpacing revenues during the Great Recession and the “flatlined” revenue period following (that DeKalb, by the way, still hasn’t quite overcome). A nice side effect was meeting capital needs. Following the reduction in force, there was enough money to put into the fleet, a new police station, and needed expansion/repairs of the fire stations.
But now, the gap is closing and, once again, money for capital needs has disappeared. And since most of the rise in expenses reflects increases in wages and pension contributions, it’s clear the reset has been squandered by the hiring spree that came after. Read the rest of this entry
Filed under: City Watch
, Payment Due?
| Tagged as: budget
City of DeKalb released its Comprehensive Annual Financial Report (CAFR) for fiscal year 2015, which ended June 30.
I’m sure city staff will also release the Popular Annual Financial Report (PAFR) as they did last year. It’s a dumbed-down version of the CAFR that nobody asked them to compile, but they get some sort of warm-fuzzy award for it, so it’s all good.
Let’s update some charts. First, the hiring news:
The hiring spree is still on.
The General Fund budget for personnel expenses this year is $26.9 million, a rise of 2% over last year and a net increase of $500,000 in this budget category. There are a couple reasons why the increase was “only” 2%. The primary reason is that a chunk representing another 2% was sent over to the Water Fund for Water to pay. They’ve also succeeded in reducing health care costs (something I’d like to compliment them on sometime, if only they’d stop annoying me for a minute with the Bozo no-nos).
But wages and pension costs are both increasing well above inflationary levels. I anticipate they will have to come up with $500,000-$700,000 more for this budget category next year.
In other words, despite the rosy picture staff will paint next month in an effort to persuade the city council to hire a human resources director, the council should no way, no how approve any more hires and, in fact, should let attrition do its work for awhile. Read the rest of this entry
David Patzelt of Shodeen Group, LLC, sent a nice thank-you letter to the DeKalb city manager for attending a meeting between Shodeen principals and city officials in the matter of Shodeen’s latest project proposal. The letter was included in the agenda packet for Wednesday’s meeting of the Planning and Zoning Commission. It outlines Shodeen’s arguments against the city’s insistence on its providing retail space on the ground-floor level of the apartment complex plan.
As you know we are a commercial and retail Developer, Builder, Owner and Management Company. Like staff, we too wish that the market in DeKalb was strong enough to support commercial/retail in the lower level of the proposed residential building. As we discussed with you, City staffs position on this being a requirement is unwarranted and unfounded. Even if the City will subsidize the rent as well as commit to a guarantee of rent payments, we do not recommend the addition of retail space at this point in time. Staff continues to be unwilling to accept this without any basis other than a “want.” Empty retail space should not be a “want.”
(The underlined words appear that way in the original.)
No, it’s not a matter of acceptance, nor just a “want.” It’s an actual requirement for the downtown business district. Staff can’t change it. Only city council can.
But an even larger policy change would be the use of rent subsidies and guarantees to get the project built the way the city wants.
We knew we’d have a tussle over TIF funding for redevelopment on this site. Has the city placed other subsidies on the table for consideration?
I’ve begun a Facebook discussion thread here.
Former DeKalb Alderman Pam Verbic wrote current Mayor Rey a detailed letter regarding the upcoming property tax levy vote. Find it here. I hope you will read the whole thing.
Each of Ms. Verbic’s points is well taken and stands on its own. I don’t intend to rehash the letter. But her #4 relates closely to views I’ve shared for two-years-plus about the hiring spree and its impacts on city budgets, and it furthermore reminds me to look at the morality of the situation as well as the practical.
4. Since I was a council member in 2011, I know what it means to have to lay off employees to contain costs. At that time, the number of employees were reduced by 29 from 231 to 202. No positions were eliminated in police or fire. There would be no immediate savings due to the costs of separation, so savings were to be realized on a long-term basis. This did not happen because later councils approved adding new employees, including several higher paid management positions. Last year’s staff memo concerning the tax levy reported that the number of employees had then increased back to 224.
The layoffs followed several years in which the city took a number of measures to try to regain control of its finances. City officials talked layoffs as early as the latter half of 2007, which prompted early retirements. They froze hiring. They forced expense cuts. They raised taxes and fees. They delayed purchases of big-ticket items like vehicles. If I remember correctly, they even froze pay for a year.
These actions were not enough, and an across-the-board pay cut was rejected, so layoffs became the last resort to achieve a reset of compensation to match the new revenue reality. But it needed time to work, and DeKalb only waited one year before starting the hiring spree.
We often focus on the tax burden in a town that sees little prosperity, and of course that is vitally important to consider. However, job loss involves pain, and the recent lack of restraint in hiring has all but rendered meaningless the sacrifice of city workers for what was supposed to be the greater good.
It’s shameful. But in my opinion, it’s an error that could still be reversed.
One argument in favor of hiking property taxes in City of DeKalb is that the city has reduced general operations (General Fund/GF) budgeted expenditures by $800,000 from last fiscal year to this one, which ostensibly shows that DeKalb has already cut expenditures to the bone.
The fact is, DeKalb has a runaway spending problem, budgeting $2.3 million more for personnel this fiscal year than in FY2014.
Read through to see how this was done. Read the rest of this entry
Filed under: City Watch
, Payment Due?
| Tagged as: budget
As the city ponders a property tax hike of 37% as well as water rate and fee “adjustments,” you may wonder how DeKalb has got itself mired in financial straits.
It’s actually nothing new. DeKalb’s budget issues are — and have been since at least 2005 — the result of snatching nearly every penny of revenue growth and putting them into more staff and higher salaries, to the detriment of other areas such as street maintenance.
Worse yet, DeKalb has to come up with, at minimum, a half-million new dollars in revenue each budget cycle just to stay abreast of annual personnel cost increases. It’s rendered the financial gurus unable to look ahead more than 12 months at a time because they continually need to chase the next rabbit for the proverbial hat.
Want proof? The stated Number One strategic priority of the City of DeKalb is “Infrastructure,” yet capital improvements are precisely the area that’s been starved in the current budget. That’s pretty messed up.
And a proposed 37% hike in property taxes bespeaks the latest shortage of bunnies for the hat trick. Read the rest of this entry