Higher Taxes Coming to Crest Hill

At the last work session concerning the City budget at the end of June, the budget as it stood after all the adjustments made during the weeks of hearings was presented.  Mayor Soliman then followed with questions of the council members regarding their opinions on various budget issues.  The final budget was approximately $300,000 in deficit even after every fix was made.

The Mayor kicked off the questions by asking each Council member individually if they would support increasing the utility tax on electricity and natural gas or the sales tax.  The City Administrator and the Mayor discussed the rates in surrounding communities to justify that Crest Hill is below average in taxes and should catch up.  The majority of Council members supported doubling the utility tax to bring in a little of $100,000 of additional revenue annually.  This will be enacted in the near future since the Mayor got the support he needed to raise it.  The Council was also open to raising the sales tax, but recognized that it would be years before any additional revenue would be seen, since the tax would need to be approved by the voters and they would need to do a long educational campaign before there would be any chance of getting it passed at referendum.

The Mayor then asked each member if they were comfortable with the budget being in deficit as it stood.  A number were comfortable with it either because they felt that it was the best that could be done under the current circumstances, felt that a great effort had been made and it was much better than it could have been, or recognized that a large part of the deficit is due to one time costs due to switching insurance.  Others were uncomfortable with it, but were challenged by the Mayor and council members who pointed out that there had already been weeks of discussion and that a budget had to get passed.  There seemed to be an attitude of this is the best that we could come up with so everyone should be comfortable with it.

The final question each alderman was asked was if they had any ideas to fix the budget.  A number of members advocated tightening on small expenses such as costs of conferences,  the purchasing coffee and disposable cups for City Hall, and the Mayor's gas and petty cash expenditures.  These items would not make a huge dent in the budget, but were looked at as every penny counts and making sure the Council was feeling some of the pain as well as the city staff.  Alderman Sternisha spoke on some of the suggestions he has made to the Council early on in the hearings regarding freezing salaries and not hiring more employees, but he did not have the whole list because the Council had not been expecting this line of questioning at this particular budget hearing.  Alderman Convery for some reason decided to attack Sternihsa's suggestion of not hiring more employees and kept asking him to be specific as to who not to hire.  Convery did not seem to grasp the idea that not hiring any additional employees did not mean to firing recently hired employees, but instead meant that from that point forward not hiring any more.  The Treasurer also spoke on some of his ideas for furlough days for city employees and creating an annual business license as opposed to the current license that is good forever.  He was pointing out that Menard's paid $25 for a business license that is good forever, while many households pay more than that each year just to get city vehicle stickers.  The City Clerk got quite upset at this since her office would have to issue the permits and she had not been consulted.

The Mayor gave everyone an insight into his thinking just in the order of the questions and how he presented them.  His first thought was to raise taxes, then to gauge comfort with being in deficit, and lastly to looking for other solutions.  This city needs leadership who put finding solutions and alternatives first and put raising taxes as last resort.  Unfortunately, Mayor Soliman looks to our pocketbooks first and makes it clear that higher taxes come before all else.

City Treasurer Delays Protecting City Money

At Monday night's work session  of the Crest Hill City Council, the city's bond counsel and another financial advisor presented an analysis of the city's finances and recommendations of actions to be taken or considered.  Most of the presentation was focused on issuing bonds to pay for upgrades to the sanitary sewer system, but some general issues were also addressed.  One recommendation was that the city needs an investment policy that requires all deposits in excess of FDIC insurance to be fully collateralized with either US Treasury or US Agency securities, that those securities be held by a third party, and that the value of those securities be marked to market monthly to determine actual value.  This is to ensure that the city's money is backed by good securities, that those securities have not been pledged to other depositors as has been done by some banks, and to ensure that the value of those securities has not dropped below the amount being collateralized.

City Treasurer, Joe Bobikiewicz, responded that the auditors made the same recommendation back in September of 2009 and he has been working on it with the City Attorney.  When pressed as to when a policy would be ready, he responded that it would be a few months, but that he would poke the Attorney at the next council meeting and let him know to get working on it again.  He stated that he plans to have it in place before the next audit so that the City does not get dinged again. 

This is a shocking and dangerous attitude that he is taking.  He refuses to make protecting the city's money a priority.  Instead of waiting for the next meeting, he should pick up a phone and call the City Attorney.  In fact, he should have taken care of this at least 7 months ago when the issue was raised by the city's auditors.  He was even aware of this issue before then since I had brought questions regarding the collateralization of city deposits to his attention in March of 2009.  

This is not a policy to be put on the back burner, this is not something that can wait, this is something that needs to be done now and implemented now.  This is not about the Treasurer not getting dinged on an audit.  This is about one day finding out that the city has millions of dollars of deposits that were improperly collateralized with toxic assets, bonds pledged to multiple cities, or long term securities that have to be sold at below face value in order to access our money.  These are real threats and we need to demand that the City and the City Treasurer better protect our money.

TIF District Under Consideration

The City Council will be discussing Tax Increment Financing (TIF) districts at tonight's work session.  TIF districts are a tool that has been used by cities to promote economic development of depressed areas.  Such districts are not without controversy though because the benefits they provide come at a cost to other areas and taxing bodies.

A TIF district is a defined area encompassing all the properties within the boundaries that are created for it.  The amount of property taxes received by each of the taxing bodies is frozen for 23 years.  Over those years as the property values increase, the taxes paid also increase; but the increased amount is paid to the city and goes to a designated TIF fund.  That increased amount is the tax increment.  This money is then used to pay for improvements within the TIF district that are meant to attract new development to the TIF district.  These improvements can be anything from streetscaping to parking garages to even providing incentives directly to businesses.  The funds are not supposed to pay for ordinary operating expenses such as filling potholes, plowing streets, or providing police protection.  The area encompassed within a TIF district are meant to be properties that are currently blighted and are not reasonably expected to be able to be improved otherwise.

Many cities have used TIF districts to create new economic development and have seen them as very useful tools.  They feel that without the TIF districts redevelopment of blighted areas would not have been possible.  TIF districts are able to provide large amounts of money for redevelopment especially in cases where the improvements are put in early on using borrowed money and then paid back over the 23 years as the increased tax increment dollars are collected.  This of course exposes the city to the risk that the increase is not sufficient to pay back the debt.

TIF districts are opposed by some because of the effect they can have on other taxing bodies, their long life, and their misuse in some cities.  The amount that other taxing bodies receive in property taxes from a TIF district are frozen for 23 years.  The reasoning behind this is that these are blighted properties that would not otherwise have increased in value if not for the improvements.  However, this is a false notion because one would be hard pressed to find any property in this area, even the most blighted, that is today paying less in taxes than they were in 1986.  A rising tide lifts all boats.  This means that the schools, parks, and fire districts are losing out on revenue they otherwise would have collected even if no new development had happened. 

TIF districts can also create new costs for other taxing bodies that did not previously exist.  If a TIF district is developed to include condos and other residential uses in an area that previously had none there are no more students to be educated, but no additional funds to pay for that education.  The rest of the taxpayers outside of the TIF district would have to pick up that cost.  The same would be true of increased need for policing if the TIF contained additional commercial uses such as bars, restaurants, and shopping.  Many proponents of TIF districts claim that they do not increase anyone's taxes.  However, the additional costs created that cannot be paid using TIF funds must be paid for by someone and that someone will be all the taxpayers outside of the TIF district.

The third concern raised is the misuse of TIF districts.  They are meant for blighted and depressed areas that would not otherwise be able to be redeveloped into a higher, better use.  There are certainly cities that have found areas that this applies to.  However, others have taken areas that are already improving and used TIF districts to speed the process along or to be able to provide even greater economic incentives to developers.  TIF districts were not meant to be used as a common economic development tool in all situations, they are instead meant for specific circumstances.  This is a concern because of the costs that TIF districts can impose upon other taxing bodies and on the taxpayers.  That cost may be worthwhile if it leads to development that would not otherwise be possible, but it would be a high price to pay for development that could have been brought about by other means.

I have been involved in the creation and administration of TIF districts in other cities and have seen the potential benefits they offer as well as the problems they create.  Before the city creates on, it is important that we all are educated and informed.  This means that we need to know exactly what properties will be included, what the money will be spent on, if financial incentives are being given to businesses, and what the impact on the schools and other taxing bodies will be.  Following tonight's work session, I will post details of what is being proposed by the city as well as my own analysis of the information presented.