Officials allege city misused TIF funds; new district talks postponed

DeKALB – The city of DeKalb’s attempt to move along its plan for a proposed third tax increment financing district has been put off track because of concerns that the city allegedly misused public funds.

Public discussion between city officials and taxing bodies, or the Joint Review Board, again was delayed after DeKalb School District 428 officials raised concerns about administrative fees being incorrectly charged on various TIF projects. The amount ranges anywhere from $500,000 to $800,000 a year over at least the past decade, District 428 Superindendent Jamie Craven said.

Craven said the district’s lawyer came across the information after reviewing annual TIF reports from the city over the past few months. He said administrative costs fit within the acceptable uses of TIF funds according to Illinois law, but school district officials brought the information before the Joint Review Board for consideration during its past few meetings because they thought $800,000 was excessive for the city to transfer to its general fund for only administrative costs.

“You have to be able to account for the dollars that you pulled from the TIF district,” Craven said.

Representatives from taxing bodies at the meeting Friday all were in favor of waiting about a month for the city to gather more information on past TIF spending before talking more about taxing bodies giving their blessing for the proposed TIF district. Exact times and dates for public hearings and the continued meeting next month at the DeKalb Municipal Building, 200 S. Fourth St., still have to be determined.

The conversations among taxing districts continue after a feasibility study found that the city of DeKalb would meet the necessary requirements to create the new TIF district once the current ones expire this year and in 2021. The current two districts have generated between $6 million and $8 million annually in recent years. The City Council decides how much of that money goes toward which projects or taxing bodies.

TIF districts work by freezing the amount of property tax revenue that local governments receive from properties for 23 years. As property increases in value during that period, increases in property tax payments – the increment – are diverted to a separate fund to be used for improvements.

The proposed TIF district primarily would cover downtown commercial property, including the Cornerstone and Plaza DeKalb projects, which already have received about $5 million combined in city funding. The city has used TIF districts in the area for more than 30 years.

Bessie Chronopoulos, DeKalb resident and former DeKalb mayor, said during public comment that she is not agreeing nor disagreeing with the allegations of TIF fund misuse. But, she said, she is concerned with the lack of accountability for where those administrative fees are going within the city budget.

“That is a lot of money, and it is not clear at all,” Chronopoulos said.

Jason Michnick, economic development planner for the city, said Illinois law, contracts and intergovernmental agreements determine how much money from TIF funds the city gives to which taxing body. He said the city started distributing surplus funds to the taxing bodies according to tax rates in 2011 in accordance with an intergovernmental agreement. District 428 has received more than $16.5 million since the agreement was implemented, documents show.

Mayor Jerry Smith said he has met with city officials regarding concerns of the use of TIF dollars. The $11.25 million he has offered to distribute among taxing bodies is about all the increment that remains in the city’s two active TIF accounts, Craven said.

Smith said the claims of misappropriated funds were unsubstantiated. However, he said, he is commited to doing the right thing and taking corrective action if city officials find information that corroborates school officials’ claims.

“We’d have to,” Smith said.

There no longer will be a public hearing about the proposed TIF district during the City Council meeting Monday, Smith said. He said the city will hold separate public information meetings regarding the proposed TIF district over the course of the next 30 days.

DeKalb County Board Chairman Mark Pietrowski said TIF districts can dramatically affect revenue that comes into affected taxing bodies and that he doesn’t want issues with past TIFs repeated in DeKalb.

“It’s vitally important to us that we make sure that the city of DeKalb thinks about all of these different aspects,” Pietrowski said.

Overall, Craven said, taxing bodies only want to make sure adequate oversight would be established for the proposed TIF district so questionable spending of TIF dollars doesn’t happen again.

“Taxing bodies and the city need to develop checks and balances to ensure that this doesn’t occur again,” Craven said.