Bill Nicklas, city manager of DeKalb, owns Nicklas Consulting, LLC. I did not know this until I read a complaint in which he is named a defendant. At the time of the discovery, I was the city clerk so I hesitated to address it publicly, especially when thinking of him as an abuser guarantees bias on my part. But a transparently biased view is better than not discussing these ethical issues at all, and it’s important we chip away at the impunity afforded some of our local leaders if we want to build a better local government.
So let me count the ways Nicklas Consulting is ethically problematic.
The employment contract with DeKalb doesn’t allow side gigs. The contract states in three places that Mr. Nicklas is to work exclusively for City of DeKalb, with termination for cause an option if he engages in competing or other outside employment “without the express prior written consent of the Employer.” Since the employer is the city council, the approval would be hashed out in an open meeting, but this conversation has never happened.
City of DeKalb policy reinforces the contract language. A rule from the employees’ handbook states city employees must obtain approval from their superiors to commence outside employment and to seek reapproval annually. Mr. Nicklas signed a form saying he had no outside employment, and then approved it himself. Maybe he suspended consulting activities for the city manager’s job, but the failure to discuss continued ownership prevented an evaluation of the appropriateness and potential consequences of maintaining the active status of the corporation. This is the council’s responsibility and purview, not Nicklas’.
ICMA takes ethics seriously. The premier professional organization for managers in government, the International City/County Management Association, not only has crafted a strict code of conduct and ethics but also a structure for providing training, advice, and enforcement that can include public censure of members who violate the code. DeKalb city management do not pay dues to ICMA, but they are members of the state-level version of the organization, ILCMA, whose membership has adopted the ICMA ethics code. ICMA looks at outside employment the same way Nicklas’ contract and DeKalb’s personnel policies do: that outside work should be employer-approved in advance. The code furthermore states that conflicts of interest should be avoided, as well as even the appearance of conflicts of interest.
The existence of Nicklas Consulting helps to create the appearance of a conflict of interest and partiality. According to the aforementioned complaint (that I hope you’ll read if you haven’t already) a developer who’s been a client for Nicklas’ services became a major investor in the TIF redevelopment project that replaced another TIF redevelopment project called 145 Fisk after Bill Nicklas convinced the city council to revoke its preliminary approval of Fisk. If Mr. Nicklas had dissolved his corporation upon accepting the manager’s position, he’d have provided less fodder for the plaintiff.
We expect total pension liabilities will go up with raises, cost of living adjustments, etc. However, the unfunded portions of the liabilities should not. Actuarially determined annual pension contributions are supposed to ensure they don’t rise. Yet you can see by the chart that unfunded liabilities for police and fire climbed steadily for a generation. We’ve now accumulated some $126 million in liability debt. One of the consequences is this year’s contribution total of $9.7 million, which will gobble more than a quarter of the city’s operating budget.
However, the chart also indicates that someone began applying the brakes in 2018. It’s important to explain this so we can support policies that continue the trend to reduce unfunded liabilities.
Amid habitual deficiencies in internal financial controls, DeKalb’s move to a new city hall has created physical security risks, according to the city’s auditor for budget year 2020.
During our observation of the City’s internal controls, we noted the initial entrance/front of the building has limited security and minimal restriction to the departments stationed in this area. Access from the back of the building is also available and requires no key card for entry. Cash and other City tangible assets/property should be reasonably safeguarded to protect the City from loss.
We recommend the City implement a more restrictive environment, where departmental employees work together to avoid instances where one employee is left being responsible for the department, running the cash registers, and overseeing the City safe. In order to help mitigate this risk, we recommend the City implement and enforce a more comprehensive control environment where appropriate/trained employees can support the department and the public. In addition, to improve physical access and ensure security amongst City employees and the general public, we recommend implementing a key card and electronic access system.
City Finance Staff have lock and vault procedures in place to protect on site [sic] assets. Presently, the building maintains two entry points to accommodate individuals with a physical disability. City Staff in FY2021 can investigate modifying the Lincoln Hwy entrance into an Americans with Disability Act (ADA) compliant entry thus eliminating the need for having an additional open door on the first floor.
City hall has been in this building a year. Blaming the ADA for not fixing the entry issue doesn’t cut it, and “lock and vault” procedures aren’t a substitute for having two staff on hand when the situation calls for it.
In all, it doesn’t sound like management intends to take the steps necessary to mitigate the risks, but that is par for DeKalb’s course. Deficiencies from the 2019 audit, such as failure to assign a second person to review transactions and to reconcile bank statements timely, were not corrected in 2020. One deficiency that was corrected in 2020, that of water rates billed that did not match the rates authorized by ordinance, was originally identified during the 2018 audit.
Management is careless with our money and the record shows it. City council is either clueless or doesn’t care.
DeKalb Park District put out a Request for Proposals for a new IT contract. Eight firms applied. Of these, staff whittled down the list to three finalists: CMJ IT Solutions of Sycamore, Noventech of Lombard, and Sundog IT of DeKalb. The park board will probably be making a decision tomorrow.
I’ve read the three proposals and believe all of them merit consideration. However, Sundog presents special problems because its president is DeKalb Mayor Cohen Barnes and he wants to deliver his own hands-on personal service. From his proposal:
Cohen Barnes will also be assigned the role of VCIO and be available for broader IT related discussions, discussions with the DeKalb Park District Leadership Team and Board when necessary. Cohen will also be directly involved in budget creation and discussions with District Staff.
VCIO stands for virtual chief information officer. Normally, a CIO of any sort would be an employee of the organization being served, with a legitimate role in budget creation, as opposed to a salesperson working an upsell strategy.
Contrast Mr. VCIO’s approach with Noventech’s proposal:
The performance by Provider of its duties and obligations under this Agreement will be that of an independent contractor, and nothing herein will create or imply an agency relationship between Provider and Client, nor will this Agreement be deemed to constitute a joint venture or partnership between the parties.
Noventech’s proposal also would cost $1,500 less per month than Sundog’s.
Regardless of the board’s choice, the park district should designate its own CIO or liaison, and not allow contractors to insinuate themselves into inappropriate roles.
Hooplah started when Nicole Virgil and her family decided to take their raised-bed organic gardening to the next level by growing as close to year-round as possible. The plan involved assembling a hoop house in the fall and taking it down in the spring. It is something they assumed was an accessory structure to gardening as is, say, a shed. But then a neighbor complained about it, and City of Elmhurst forced the Virgils to take it down in February 2017.
Elmhurst has no ordinances that prohibit hoop houses, so from the beginning the city offered nothing but 100% bad faith. Eventually, Ms. Virgil and her neighbors turned to state legislators for help.
The new law protects gardening statewide by not allowing home rule units to “opt out.” Municipalities with home rule powers can still make rules, but must ensure any regulation or ordinance “does not have the effect of precluding vegetable gardens.”
Below is the year-to-date expenditure report for fire operations for December 2020. Two things are startling about it. First you see that overtime expenses reached $1.1 million for the year, which exceeds the budget for o.t. by $688,000. Then see how DeKalb failed to make a final pension contribution of $708,000 on time, which was not the case for the other years I checked (2019, 2018, and 2017).
Do you remember my post about the city taking chunks of first responder pension contributions out of the fire and police departmental budgets and disappearing them into General Fund Support for 2021? (If not, or if you want a refresher, check it out here.) The amount removed from the fire budget was $746,000.
I alerted you to the change, but we never talked about the why. The city manager said at a budget meeting that separating property tax allocations from non-property tax contributions for the pensions was a way to highlight how much of the pensions the property tax revenues fail to cover. But obviously, the most practical goal in removing hundreds of thousands from a departmental budget is to create a surplus or to erase or diminish an anticipated deficit from that budget.
Looking at it this way, and particularly with o.t., missed or late pension payment, and the wholesale removal of pension obligations from the FD budget all hovering in the neighborhood of $700,000, these unusual activities start to look like a juggling act to hide a deficit of that amount.
***UPDATE 4/8/2021:After writing the original post, I decided to phone the Public Access Counselor (PAC) of the Attorney General’s Office to discuss possible Open Meetings Act implications of the incident described in it. Following the discussion, I filed a Request for Review and today I was notified that the PAC has accepted the request. Below is a copy.
The TIF forensic assessment revealed that City of DeKalb was unable to locate documents the auditors asked for, even basic records like invoices. We will never know whether the city lost invoices or just paid the developers without bothering with them. But here’s a clue: careless handling of contracts worth more than $180,000, to be paid out of TIF funds, occurred during a council meeting just last week. At minimum, the handling lowered their visibility.
Consideration versus Resolution
The March 22, 2021 DeKalb city council meeting agenda has separate sections for considerations and resolutions. Here’s the first consideration:
1. Consideration of a Contract with Gehrke Construction for the Repair and Remodeling of Fire Station One in the Amount of $139,205.00.
And here’s the first resolution on the same agenda.
1. Resolution 2021-023 Approving a Second Addendum to the Non-Exclusive License Agreement for the Installation of Underground Fiber Optic Facilities within the Public Right-of-Way (Dated June 15, 2010) for the Expansion of the Annie Glidden North Broadband Infrastructure Project.
Two things distinguish a resolution from a consideration: level of detail and a unique identifying number. A consideration is a discussion item only, meant as a way for city staff to take direction from the council on next steps, which might eventually include a resolution. A resolution, on the other hand, is an action item and is a detailed document by necessity. It must have a title detailed enough for a reasonable person to understand what council is voting on, and more details in its body, such as authorizations and other assignments for executing the action.
Mayor Jerry Smith has just endorsed Cohen Barnes for mayor. How is that credible? Mayor Smith has rarely acted in a way that shows he understands the mayor’s role as champion of all the people. Former DeKalb Alderman David Jacobson was the one who showed up at Lord Stanley’s to talk to worried residents. Current DeKalb Alderman Carolyn Morris was the one who defended me against a smear campaign in an illegal closed session that excluded me – and then she defended DeKalb voters by voting to save the clerk’s office from malicious destruction.
DeKalb’s city council has so far failed to face the troubling results of its last annual audit. This has led to a failure to recognize the connections between those results and the turnover and staff reductions in Finance Division, including the loss of a full-time finance director.
And the squeeze is still on for this year.
To put this into historical context, DeKalb used to have ten full-time, in-house finance staff, including an appointed treasurer/controller and two senior account clerks. Now there is no named full-time treasurer or controller, reductions in positions have occurred three years running, and these remaining staff are supervised by the assistant city manager, who also supervises human resources and information technology personnel.