Life after Rita: Dixon officials reflect on city transformation 10 years after Crundwell arrest

DIXON - The catalyst that shook the community and made a ripple of significant changes to city government created a new path to prosperity for Dixon, officials said in response to the 10 year anniversary of ex-Comptroller Rita Crundwell’s arrest for embezzling $53.7 million.

Sunday marks a decade since Crundwell was carted out in cuffs on April 17, 2012, for what’s pegged as the largest municipal theft in U.S. history, stealing millions of city funds across her 20-year tenure in office. She used the ill-gotten gains to fund a lavish lifestyle raising champion quarterhorses while Dixon struggled to pay for infrastructure and other projects.

She was sentenced to serve 19 years and 7 months, nearly the 20-year maximum, in federal prison on Feb 14, 2013, by U.S. District Judge Philip G. Reinhard in Federal Court in Rockford.

Crundwell was required to serve as least 85% of her sentence, but she was released from federal prison in Pekin in August, about a year after pursuing compassionate release citing illness and fear of contracting COVID-19.

[ Rita’s out: Crundwell released from federal prison ]

Crundwell was, at least initially, allowed to return to her family in Dixon on Aug. 4, but her current whereabouts are not known.

The federal Bureau of Prisons does not release that information because of inmate privacy issues, but she is listed under the supervision of the Residential Recovery Management field office in Chicago, which places prisoners in either home confinement, also known as house arrest, or in halfway houses, on their way back into society.

That reopened community wounds, especially with there being no notice to city officials or law enforcement.

[ ‘A slap in the face’: Crundwell’s relocation from Pekin prison hits hard in Dixon ]

“You could see all of the emotions across the community when she was arrested, and wounds that had healed so well were reopened again when she was released,” Mayor Li Arellano Jr. said. “It was a temporary blip though; I think the city has moved on wonderfully.”

He attributes the quick recovery to the years of efforts the city has made to be known for more positive impacts, whether it be economic development, infrastructure improvements or the transparent relationship with the public.

Goodbye Rita, hello change

The aftershock of Crundwell’s crimes led to a massive overhaul on the city government level, starting with then-Financial Director Paula Meyer adopting a new system of financial checks and balances. The city also held a referendum where community members decided to convert to a council-manager form of government, rather than commissioner form. Voters then elected an entirely new council and mayor.

They restructured many city policies from auditing and financial duties to department heads and transparency practices.

“Since the arrest of Crundwell, we completely revamped and restructured our finance department,” City Manager Danny Langloss said. “We have the best internal controls possible.”

ExpandAutoplay

Image 1 of 32

Federal agents enter Dixon city hall Tuesday April 17, 2012 after investigators seized files and arrested Dixon city comptroller Rita Crundwell. (Alex T. Paschal/apaschal@saukvalley.com)

That also led to consolidating departments into a public works hub, which resulted in several changes including streamlining how the city would choose what streets to repair - based on condition ratings rather than community call-ins - and developing a skilled team to do more projects in-house saving hundreds of thousands of dollars.

Other strengths include forming a city economic development team and pursuing grants for a multitude of projects of which the city has been quite successful such as the $12 million federal Department of Transportation RAISE grant to build a pedestrian bridge across the Rock River on former railroad pylons and extend the city bike path.

[ Dixon wins $12 million grant to build pedestrian bridge across river, extend path system ]

City staff have adopted a “do whatever it takes” mindset, Langloss said, and it’s “all about creating a culture and having everything ignited through common purpose.”

That’s coupled with forming partnerships with the Dixon Park District, Lee County, school district and others that weren’t in place before.

“We’re accomplishing things people have been trying to do for the last 30 years,” Langloss said. “The momentum begins to feed itself, and as a team you want that momentum to keep ramping up and ramping up and ramping up.”

Several projects are becoming reality after years of work that includes working with landowners to open up development in the Interstate 88 corridor, annexing 657 acres into the city, creating two tax-increment financing districts, environmental cleanup along the riverfront and landing large commercial developments.

There’s the Viaduct Point riverfront revitalization project, a partnership in which the city and the Lee County Industrial Development Association secured about 10 acres of land stretching from the Peoria Avenue Bridge to the viaducts, as well as the Gateway Project.

Gateway is a 27-acre project to bring at least one new hotel, gas station, restaurants and shops to Dixon along South Galena Avenue across from Walmart between Keul and Bloody Gulch roads with plans to include the construction of a dozen buildings. The project, breaking ground at the end of the month, is expected to create more than 600 jobs and $1 million a year in new tax revenue.

[ Development efforts progress in Dixon ]

“The city is in such a healthier position,” Arellano said. “The financial strength is unheard of compared to the last few decades.”

“We’ve grown and changed for the better in leaps and bounds,” Arellano added. “We’re not done, and there’s more to do. We’ve come a long way in the last decade, and in the next decade I think we have a good plan to take the city further.”

Show me the recovery money

Crundwell carries a debt that can never be repaid to Dixon, but the city did recoup millions in losses that were placed in the “recovery fund.”

The city reached a $40 million settlement with its former auditors and bank, CliftonLarsonAllen, which failed to spot the long-term siphoning, and a quarter of that – about $10 million – went to lawyer fees.

That total was brought back up to about $40 million after the city received $10.3 million from the federal government’s sale of Crundwell’s seized assets that included her roughly 400 award-winning quarter horses, her Dixon ranch and home, and her Florida vacation home.

The checks came in by the end of 2013.

The city also received about $150,000 after the U.S. Marshals Service sold her remaining possessions through online auctions that wrapped up in 2016, and also gets a small sum from horse breeding royalties.

The first thing Meyer insisted on doing with the money was repay the city’s debt.

That consisted of $12,572,318 in general obligation debt, largely for capital projects, and $8,678,083 borrowed from mostly restricted city funds that needed to be paid back, totaling $21,250,401.

Meyer set up two reserve pools with $5 million as a rainy day fund – enough to operate the city for 6 months without revenue – and $3 million as an emergency capital fund.

Most cities carry about 6 months of operating expenses, but Dixon had no reserves to speak of.

The former City Council started spending the recovery dollars in spring 2014, putting nearly $4,073,980 into the River Street revitalization project.

About $1.1 million went toward repairs and renovations at the Dixon Public Library, and in June 2015, $856,538 was used to make emergency repairs to a portion of West Seventh Street that collapsed following a heavy rain.

Another $25,000 was put toward tearing down derelict property, and $15,000 was given to the Dixon Sister Cities Association.

In more recent years, the city devoted $1.5 million to the fire pension fund, about $1.2 million to the future bike path extension project, as well as earmarking $250,000 for future development.

The council also gave the Dixon Park District a $100,000 donation for the Water Wonderland splash pad and $700,000 to build the foundation for a community center next to the splash pad in Meadows Park.

There’s $1,301,729 left in available-to-spend money, not counting the reserves.

Crundwell’s tab sits at roughly $43 million owed to the city.