Police & Fire Pensions are only part of DeKalb’s liability story

The Better Government Association has just rolled out a statewide police and fire pension database. It tracks public safety pensions for every municipality, township, and special district (e.g., fire protection district) that have one or both types of pension funds.

According to this database, DeKalb’s fire pension showed a net liability of $42.7 million and a 39.21% funding ratio “as of 2016.” At the same point in time, the police pension fund had a net liability of $34.4 million and a funding ratio of 48.77%. The combined net liability, then, was a bit over $77 million.

I’ve checked the BGA numbers against the city’s latest annual financial report to make sure they’re in the same ballpark, and they are.

What the BGA database doesn’t tell you about is DeKalb’s other long-term liabilities related to retirees. One is the Illinois Municipal Retirement Fund (IMRF) — yeah, it’s not 100% funded as you might think. The city’s latest reported IMRF net liability is $9.4 million and funding at 83.2%.

Another, as discussed here a few months ago, is the Other Post-Employment Benefits, which is a defined-benefit retiree health insurance plan. OPEB — which our financial consultants have twice urged us to dump in favor of a defined-contribution PEHP plan* — has an unfunded long-term liability of $23.9 million and a funding ratio of 0% because the city doesn’t fund this plan in advance.

Audited numbers for 2017 should come out in May. Meantime, we’re looking at unfunded retirement-related liabilities of $110 million.

*City employees hired since 2011 do participate in a PEHP instead of OPEB.

BONUS: DeKalb’s pension funding ratios as of 1999 (as reported in the fiscal 2004 financial report):

IMRF: 109.49%
Police: 88.52%
Fire: 62.13%

DeKalb playing favorites with the bandit in the castle

Cohen Barnes owns a building in downtown DeKalb under the name “The Bandit’s Castle, LLC.”

So he’s a bandit who bought a castle. Is this like the tv shows where the psychos leave little clues of their crimes? The imagination runs wild.

The thing with bandits is that, by definition, they belong to gangs. This is more or less what we saw last night, with City of DeKalb enabling Mr. Barnes to return to council to grab more TIF money since his rehab job on the Castle, for which he obtained a development incentive of $400,000 last spring, has hit a snag.

What’s the snag? Nobody anticipated that a 100-year-old building could have water damage and asbestos. No inspection was done, and no money for contingencies was set aside. It’s municipal malpractice, is what it is.

But due diligence doesn’t matter, because the city checkbook is simply always open for Mr. Barnes.

Many thanks go out to Aldermen David Jacobson and Mike Verbic, who voted against the double dipping. (Alderman Pat Fagan recused himself.)

Y’all folks in the Third, Fifth, and Seventh wards have a year to find replacements.

A fresh look at “old” financial advice for DeKalb

At a recent budget meeting, DeKalb city manager Anne Marie Gaura (AMG) stated that she references the “EPI reports” frequently in financial planning.

Because the city’s finance advisory committee might likewise like to revisit EPI findings when it (the committee) reconvenes in 2018, I’d like to introduce EPI to our newer readers (and help refresh memories).

EPI stands for Executive Partners, Inc., which is the former name of an organization of financial consultants who, in 2009 and 2013, tried to help DeKalb think more strategically about its finances.

Here’s EPI’s Larry Kujovich in the spring of 2013, talking about DeKalb’s gigantic financial hole.


Continue reading A fresh look at “old” financial advice for DeKalb

Open letter to NIU’s Board of Trustees regarding Dr. Baker’s severance package

***This letter from DeKalb resident and NIU faculty member Michael Haji-Sheikh references a Washington Post article by Jon Marcus, “Golden parachutes for presidents of public colleges with thin budgets.” ~yinn

Dear Board of Trustees,

As a citizen of Illinois, I have become aware of another embarrassing news article. Unfortunately, the severance of Dr. Baker (and I do mean severance) has continued to bring negative publicity to NIU as shown in the following article – https://www.washingtonpost. com/amphtml/news/grade-point/ wp/2017/08/25/golden-parachutes-for-presidents-of-public-colleges-with-thin-budgets/ . This article is in one of the two largest papers in the country and will affect how we are perceived by the general public.

If your legal adviser thought that the general public would buy the “transition agreement” argument then you were wrong. From the article: “Within two weeks of that report’s public release, Baker resigned in June. In a closed-door meeting of the university’s board of trustees, he was given $587,500 in severance pay, plus up to $30,000 to cover his legal fees. He’s also due a previously unreported $83,287 for unused vacation time, the university acknowledged.” You should have told him he could report to his Faculty job in the Fall – he would never have done it (disgrace has a bitter taste). Continue reading Open letter to NIU’s Board of Trustees regarding Dr. Baker’s severance package

Pie is for Bureaucrats, Not Streets People

A friend of mine asked a couple weeks ago whether there is some way to calculate how much growth there’s been of bureaucrats in city government. Like many locals, I know that the DeKalb city manager has been generally allowed to spin off new departments and hire new administrators without restraint, but we’re somewhat lacking in numbers.

The main question: Just how top-heavy has the city become?

My approach was to look at departments funded by the General Fund — and divisions of these departments, where applicable — with a view toward defining what makes each particular department/division primarily about administration, versus frontline public safety, versus none of the above.

The details of the methodology are placed at the end of this post.

Going back far enough that I could fully appreciate what Mayor Rey and Manager Gaura have wrought, I found that expenses in the General Fund (GF) have grown by $6 million since FY2013.* Roughly $4 million of it has gone to the public safety category of police and fire personnel ($2.65 and $1.33 million, respectively) and $2 million towards administrative functions in GF departments.

To break it down further, of the $2 million for admin, a bit more than $300,000 has gone into the administrative divisions of police and fire, and the rest of it to the city manager’s office and the creation/expansion of the HR, IT, and Community Development departments.

They’re getting more in terms of GF dollars, but so is almost everybody. Are the admins actually getting a larger slice of the pie than they used to? Yes. The administrative piece from FY2011 through FY2014 averaged 21.5% of the admin-public safety total, but now its share exceeds 26%.

Public Works gets no pie, particularly not its Streets Division, which has had virtually the same budget since the personnel reduction and organization of FY2011.
Continue reading Pie is for Bureaucrats, Not Streets People

Pension Plan Membership as a Factor in Jump of Net Pension Liability

DeKalb’s latest Comprehensive Annual Financial Report (CAFR) is out. It covers Fiscal Year 2016, which ended June 30, 2016. The big news is the net pension liability.

Public safety expenses related to the operations of both the Police Department and Fire Department accounted for the largest share of expenses at $33,400,660 or 50.1% of the total. This represents a 50.1% increase from the FY15 total of $22,259,920. This increase was due primarily to the increase in the net pension liability for police and fire pension plans.

Yes, the city’s net financial position was reduced in one year by $12.4 million, and an increase in long-term liabilities accounts for about three quarters of the loss.

We can attribute a combination of factors in the increase in liabilities, not the least of which were investment returns coming in well under the actuarial assumption of 7.5%. However, today I’d like to focus on the growth of membership in the public safety pension plans, because it’s shocking to see them escalate like this while DeKalb itself is shrinking.

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DeKalb’s Decaying Support of Social Services

**Correction and clarification added 11/30**

In DeKalb’s fiscal year budget for 2008, $214,000 was allocated in the legislative department budget for social services funding. Two years later, the amount was reduced to $150,000, because the city was still experiencing post-Great Recession budget crises.

The funding has never been restored. It’s been at $150,000 ever since, split between about a dozen agencies/programs.

In the proposed FY2017 budget under consideration now, administrators went so far as to zero out this legislative line item altogether. (**correction/clarification added 11/30: it still appears as a line item, though moved to the community development department, and not at the reduced amount discussed Monday.) Council quickly restored the funding Monday evening amid public outcry. However, I doubt that serious discussion of actual policy took place.

We do need to have that discussion. Should city government fund social and supportive services? If so, what’s the plan? Continue reading DeKalb’s Decaying Support of Social Services

Surprise! What Management Analysts at City of DeKalb Don’t Do

Fun tidbit has come my way, and by “fun” I mean enormously dispiriting.

Freedom of Information Act (FOIA) request dated 10/31/2016:

Please provide examples over the past three months (8-1-16 to 10-31-16) of analysis documents produced by anyone holding the title “management analyst” within the city of DeKalb’s employment.

This request is entirely for the public good and in no manner represents a commercial request.

As budget discussions are underway it is critical that this response be returned in a timely manner. The results need not be exhaustive, a few such analyses per designated employee will suffice.

The time scope may be expanded at a later time depending upon the results of this request.

City of DeKalb’s response to this request for information:

No records were found for the time period specified in your request.

The city expects to pass a budget in a few weeks that takes effect January 1, 2017, as well as pass a possibly record-setting property tax levy, and the management analysts haven’t been analyzing a thing.

Last I checked, the so-called analysts make more than $60,000 per year in salary alone, and do clerical work such as responding to FOIA requests.

This is Why Your DeKalb City Property Taxes Have Gone Up So Much

People have been asking me why their city property taxes went up sharply this year. While much of it has to do with your assessment, of course, here’s the rest of the story.

[table id=95 /]

Until recently, City of DeKalb levied property taxes for pensions and FICA only. I went back as far as 2006, and the only years when the city levied for any other purposes are shown in the table, because collection of property taxes for bonded debt and for general corporate purposes is either new for DeKalb or a revived practice following long hiatus. Continue reading This is Why Your DeKalb City Property Taxes Have Gone Up So Much

More Gift Card Info

A couple of weeks ago, I submitted a Freedom of Information Act request regarding DeKalb’s practice of buying gift cards for employees, the latest round of which occurred in December 2015 when City of DeKalb spent $5,400 on “employee holiday gift cards” for some 230 city employees.

Among other things, the FOIA request asked for the following: “Records that indicate the cards were properly counted as compensation and that federal and state withholding occurred.” The response was as follows:

No responsive records have been identified. The City determined that in previous years, the cards were not included within taxable amounts. The City has worked to ensure strict compliance in prospective years by eliminating these gift cards from proposed budgets; there is no proposed expenditure in the draft FY16.5 budget that would include gift cards of this
nature. That change in practice was made after an internal review of this matter by the City earlier this year.

Read here for the IRS rules specific to de minimus fringe benefits when the employer is a government. Cash and cash equivalents — yeah, this means gift cards, too — cannot be excluded from income and are always taxable, regardless of amount.

Oops. That’s almost $16,000 in untaxed compensation since 2013, guys.

Also, since the city included in its response no memos or other records of the elimination of gift cards for employees, we are free to assume that the “internal review” and decision to terminate the practice of giving gift cards occurred when administrators received my FOIA request dated April 21.

See the original FOIA request and response here.