Dueling realities in DeKalb must be resolved

As the newly elected Mayor John Rey and the city council moves forward perhaps a clearer picture of DeKalb’s economic realities will emerge. Is the city in as great shape as the accolades accepted by former Mayor Kris Povlsen and City Manager Mark Biernacki the true picture?

“I feel very positive about the direction I’m leaving the city,” [Former Mayor Kris Povlsen] said. “Financially, in the last five years I’ve been in office, we’ve gone from virtually no cash in the city’s reserve, and now we have $5 million. — Northern Star.”

To get to that reported $5 million budget surplus the late Mayor Frank Van Buer appointed a finance advisory committee and the city council hired a financial consultant, Executive Partners Inc. (EPI). They eliminated 20 percent of the staff and reduced retiree benefits. They also increased more than a dozen taxes and/or fees and relied heavily on the TIF program to lessen administrative expenditures from the general fund. Debt bonds were refinanced and transfers to and from the various departments in the general fund eliminated some negative balances on the ledger.

The contrasting financial picture painted by EPI should be a major concern for the new mayor, council and administration. If their analysis and projections are accurate city taxpayers are almost certain to become quite concerned in the not too distant future, if not already.

You’ve gotta look into the future… Does your 5-year plan list what you need, or what is available in terms of resources. And at the end of the day, it doesn’t say what you need. If you’ve got to fund all your capital requirements, all your replacement funds, AND fully fund your pension plans, you’ve got a hole that is HUGE. You need to know what that hole is, even if you can’t solve it right now. Because you’re making short-term decisions, and maybe — we talked earlier about the half-million savings, or the million dollars, how can we use it? — you may need that to do just what you’re doing today, three years from now. And if you don’t have that visibility, you’re gonna get yourself in a box where you spend it now and you don’t have it in three years. Now again, this is my private sector experience; if we didn’t do this THERE, we’d be bankrupt. — Larry Kujovich, Executive Partners Incorporated in a meeting with the city council and staff.  See full report and this in depth analysis.

Rey, who was elected with 33% of the vote, must first appoint (with city council approval) a replacement for Mark Biernacki who retired as City Manager. Rudy Espiritu, who currently serves as an assistant, will man the position until it is filled. Rey told the media he wanted someone who understands municipal government and finance with experience in a community similar to DeKalb. A prerequisite for the position that would highlight a depth of understanding in municipal finance should be for the candidates to offer their choice between the $5 million cash in hand status promoted by the former mayor and city manager or the unsustainable as practiced picture described in the EPI analysis.

But as the new mayor and city council grapple with financing the operations of core government services — police, fire, water, streets and sidewalks — they are also under the gun to expand the TIF program and to placemark the projected revenue for visionary projects.

Hopefully the new faces at City Hall take a step back on the TIF proposals to look at the total picture of the community. This is especially true for Mayor Rey’s stated vision to become reality.

“Reactivating the economic vitality in the region, I think is a major overwhelming theme,” Rey said. “Beneath that, I see collaboration with NIU and others in the region being a key to facilitating that. I think the housing issue is a major consideration that we have to give attention to, but I’m becoming more convinced that attracting jobs in the community is the primary focus that will begin addressing the housing situation.”

Rey said his main focus in restoring economic vitality is “returning DeKalb to a growing, thriving community, one which is attractive to business and industry, one that is attractive to individuals to come live, grow and enjoy the amenities in our community.” — Northern Star

Sustainable economic vitality for DeKalb will be severely tested if the real estate tax burden continues to grow in the face of declining property values. The higher the rate grows to meet the levy requests of the various governmental units the more difficult it will become to sell upscale homes in the city. The higher the tax rate the less attractive DeKalb becomes to private sector job creators, site selectors and investors.

Community Unit School District 428 is facing serious challenges on their financial horizon. It is currently $2.8 million in the red on its budget ledger with similar projections in operating deficits projected each year. Some say that an operations revenue referendum is needed now. Stagnant growth in new construction EAV with declining assessments in existing properties is pushing the rate higher and higher on the $110 million debt bond repayment schedule.

Rather than creating zero-based TIF districts to capture all increases in tax revenue for city projects the city leaders hopefully recognize the better way to increase community property values might be to use TIF surplus funds to put downward pressure on the tax rate required by the school district. While separate units of government both are dependent on economic growth and vitality.

The housing issue is indeed a major consideration. As NIU struggles with its own sustainability issues they seem to have decided to venture into residential housing. They’re marketing the total package of living in new construction residential housing complete with three square meals a day. They’re requiring incoming freshmen and returning sophomores to live in the dorms beginning in 2015. Landlords who’ve made substantial private investment in student housing are concerned about vacancy rates along with the unforgiving property tax system. Restaurants and the Home Rule Restaurant and Bar tax collectors might wonder what kind of impact NIU’s total package will have on their business plan.

Attracting jobs is absolutely essential to the quality of life standard in DeKalb. According to the U.S. Census Bureau, 2007-2011 American Community Survey almost 24% of DeKalb’s families with children fall below the poverty line. That number increases to near 40% in poverty if there are children under age 5 living in the household. More than 80% of the single-mom households with children under 5 living in DeKalb are living in poverty.

Chandra Patten painted another stark picture of life in DeKalb in the Citizens’ Comments segment of the June 11 city council meeting. She asked the council if they had any ideas to improve job opportunities for local youth. She urged council members to drive by the intersection of Annie Glidden and Hillcrest during the evening hours and warned of a long summer if opportunities to earn a legitimate income did not exist. Patten has presented petitions to Rep. Bob Pritchard in an effort to keep the unemployment office or at least some of its job seeker services in DeKalb. The office has been closed due to budget cuts.

Concurrently a fast track proposal that would require millions more dollars of public investment in the downtown district is in front of the city council. A staff recommendation to approve the plan for another new vision, the DeKalb City Center, was presented to the city council at the June 24 meeting. The proposal was not reviewed by the plan commission or discussed in Committee of the Whole. Fortunately,  the council at least chose not to approve it on second reading at the June 24 meeting.

There appears to be a split on the council as to the reality of the city’s finances. Ron Naylor (5th ward) appears to believe the city has a $5 million surplus like former members Kris Povlsen, Brandon Gallagher and Tom Teresinski touted. Dave Baker (6th ward) and David Jacobson (1st ward) are of the opinion that the city has no surplus and need to rein in the spending.

Another former member of the council, Pam Verbic, reminded the council at the June 24 meeting of the difficult decisions that had to be made when the city was facing huge deficits because it allowed spending to outpace revenues. The city had to terminate some 30 employees and had to borrow money to provide those who lost their jobs with a severance package. She pointed to redundancies in the city’s economic development expenditures as an area to trim spending.

The cost of doing business was the theme for proposals to increase compensation 2%-2.5% for administrative employees covered by the management pay plan and for outsourced legal and economic development services. Jacobson took exception to that theme as he amended a motion to approve attorney Dean Frieders’ contract to remove the cost of doing business increase clause.

While every council member spoke very favorably to the level and professionalism of the services Frieders has provided the city, Mayor John Rey, Monica O’Leary (7th ward), Jacobson and Baker voted to eliminate the increase. Bill Finucane (2nd ward), Bob Snow (4th ward) and Naylor voted to keep the increase. Kristen Lash (3rd ward) passed a note to Mayor Rey before leaving the council chambers and was not present to vote on the Jacobson amendment. Rey and Naylor voted against the motion to approve the contract with Frieders.**

Lash returned to vote against a similar amendment on a motion to approve the contract, with cost of doing business increases removed, for Hopkins Solutions, one of five agencies charged with performing economic development for the city. Her vote to approve the contract was one of five in the majority. Jacobson, Baker and O’Leary voted against renewing the contract.

Employees covered under the management pay plan will have to wait until the next council meeting to learn the fate of their cost of doing business increase when the matter is on the floor for second reading.

The private sector has been coping with the cost of doing business in DeKalb since the economy turned sour. That’s what spending more than your revenue does. Consequently it adds to your debt just to maintain a paperwork surplus to brag about.

When the cost of doing business becomes a burden private investment creating new jobs and new revenue is restrained.

Uhhh, which picture is it?

**Count on a reconsideration of the cost of doing business increase clause in Frieders’ contract.