How did City of DeKalb end up paying the library’s expansion debt?


Mr. Teresinski expressed his frustration that the library debt became the City’s obligation rather than the library’s.

Mr. Teresinski commented there is no revenue that the City is using on the library’s behalf so it’s a pure add on to the City budget. City Manager Nicklas stated it was his understanding that the library needed more money for its expansion and at the time the City said they’d cover it. The library has indicated that its debt service is paid, however, the City has another 10 years left in the amount of approximately $500,000 per year.”

Minutes, joint meeting of the city council and Finance Advisory Committee of August 16, 2021.

Tom Teresinski was a DeKalb alderman when the city issued bonds on behalf of DeKalb Public Library in 2013 for the library’s expansion. Mr. Teresinski now is the senior member of the city’s Finance Advisory Committee (FAC) and in this role has helped DeKalb wrangle itself into a more financially sustainable position. If he’s questioning something about the arrangement, I’m listening (even if a bit late to the issue).

First, here are the basics. The DeKalb Public Library (DKPL) board, as a so-called “component unit” of City of DeKalb appointed by the mayor, is a hybrid organization with more authority than a city committee, but not 100% independent of city oversight. That’s why it brings its budget and tax levy request to the city each year for approval.

Another thing the library cannot do independently — so it was said in 2013 — is issue general obligation (GO) bonds. For its expansion, DKPL took upon itself several types of debt — certificates, a bank loan, even a line of credit at one point — but it had to ask the city to issue almost $6.7 million in GO bonds on its behalf for the construction, which the city did.

It was perfectly clear at the time that the library was expected to pay the annual debt service of principal and interest on the bonds, and it was allowed to adjust its property tax rate so it could.

Now, we find the city has made transfers of $490,000 and $495,000 from its General Fund to the Library Fund for budget years 2021 and 2022 that match the library’s owed bond debt service payments. An August 2020 meeting looks to be when the transfer was first proposed:

As noted under “Property Taxes” above, in order to keep the City portion of the aggregate tax rate flat in 2021, an additional $290,333 will be taken from the General Fund to help pay for the Library GO bond payment, rather than pass that full cost along to the local taxpayers. It is anticipated that as the substantial new EAV for Ferrara and Facebook hits the books in 2021, the City levy will once again be able to shoulder all of the Library GO Bond payment.

Agenda, joint meeting of the city council and Finance Advisory Committee of August 17, 2020.

If you go by the language in the above minutes and memo, it sounds like the city picked up the tab for 2013A from the library early on. But that doesn’t square with the 2013 arrangement, and it doesn’t match up with other documentation such as county property tax reports, city budgets and property tax abatement ordinances.

Here are my questions so far. If the city’s been paying (or reimbursing the library for the 2013A debt most years, then:

  • Why are no transfers from General Fund to Library Fund shown in city budgets before 2021? What was the method of “shouldering” the debt before that year?
  • Why did the city never abate the 2013A debt service amount from its property tax levy before 2021, as it does annually with all of its other general obligation debts?
  • Why did the city not include 2013A in its General Debt Service Fund listings in annual city budgets before budget year 2022?
  • Why did the library never re-adjust its tax rate to reflect the city’s takeover of the debt, whenever that actually was?

So, to summarize: a decade ago, DKPL took on the 2013A debt service payments. Since then, the city has reimbursed the library for at least the past two years without the explicit, thorough, and public discussion that taking on a half-million dollars in additional annual debt calls for — not to mention the need for explanations of the broken promise and the appearance of having pulled a fast one during the confusion of the pandemic.