Water is the new TIF

This is second of a series. First one is here.

For years, DeKalb bailed out its general operating budget with tax increment financing (TIF) funds. TIF administrative fees helped soften the blows following the 2008 market crashes and assisted the hiring spree after that. Now the enormous “TIF 1” district is gone, replaced by the “Downtown TIF” that is but a shadow of its previously glorious, slush-fund-y self.

Pandemic relief money — just in time — is now subsidizing the city’s payroll and will continue to do so for a couple more years. What follows when that’s gone, especially now that other federal funds will disappear with our population losses? My hypothesis is the Water Operations Fund will see pressure to take on more of the bailout role.

Water Ops already assists in compensating city employees who work outside of that division, and has for ages. But since 2016 it’s hard to spot. The city scrapped its policy of clean, transparent transfers from Water Fund to General Fund and adopted deceptive budgeting practices that help to conceal the dependence on water sales.*

The Water Ops budget for regular full-time wages this year is $1.2 million, enough to cover base wages for 15 Water (aka Utility) employees including supervisors. But Water only has nine full-timers. The rest goes to help staff the city manager’s office and divisions under the manager’s direct supervision (Finance, HR, IT) without this being shown anywhere in the General Fund budget where these offices and divisions reside. Water also is apparently picking up the insurance tab for more than its nine workers, as its currently budgeted expense for employee health insurance is $569,000.*

size-of-water-div-2021

Continue reading Water is the new TIF

DeKalb taps into water trends

First of a series.

The Better Government Association recently published an article about Joliet’s ambitious and controversial mayor, who plans to buy Lake Michigan water from Chicago.

[Water scarcity] tensions have arrived in northeastern Illinois, which, despite its proximity to the world’s fourth-largest source of fresh water, faces a coming water crisis.

Among the first battlegrounds are Chicago’s southwest suburbs, which have been reliably served for 150 years by underground sandstone aquifers that soon won’t be able to keep up with forecasted demand.

The loss of the aquifers — which comes as water bills are already rising and climate change accelerates — will leave many Chicago suburbs with the added expense of finding alternative sources to survive.

BGA: “Pipeline to Chicago could make Joliet mayor the new suburban water czar”

Joliet has about a decade to solve the problem. The idea is to find alternatives to pumping its aquifer dry and to conserve what’s left in the aquifer for emergencies. Its mayor wants to fund the infrastructure for piping surface water by reselling the lake water to neighboring communities and by recruiting new customers in the form of large industrial users of water — a scheme that has landed the city in court, so who knows how this will turn out.

Continue reading DeKalb taps into water trends

A look back: DeKalb and its radium water

25 years ago, residents of DeKalb organized to pressure the city to reduce the amount of radium in our drinking water. The city, which already had obtained a variance that allowed it to exceed EPA limits for radium, required a second variance in 1996 to obtain permits to extend water mains for new construction. This presented an opportunity to argue for a higher standard for the long-term health of the community. Upon discovering the Illinois Pollution Control Board regulations allowed for citizens to request public hearings, that’s what they did. Here’s the letter to the editor that Linda Lahey wrote to alert her neighbors of the upcoming public hearing:

linda-lahey-letter-7-1-1996

And here is the city’s rebuttal, two days later:

nicklas-letter-7-3-96

This was city government attacking an individual who disagreed with its policy, and the newspaper of record approving the hostilities. The double betrayal must have been devastating at the time. But the residents persisted. They filed suit against the city in December 2016 and, just shy of a year later, they won.

Continue reading A look back: DeKalb and its radium water

Charging the Water Fund for salaries in other departments is a masterpiece of nontransparency

*Note: “Departments” as used in this article should be read as shorthand for “departments, divisions, and offices.”*

Take a look at this budget from DeKalb’s Finance Division:

FY2020-Finance-adopted-budget

Seems pretty straightforward, right? Well, it’s not. It does not show all the wages the Finance employees get paid. This is a budget that accounts only for the wages coming from the General Fund (the city’s chief operating fund). Finance staff also get paid portions of their wages from the Water Fund.

Total full- and part-time wages this year for Finance people are projected to come to $157,000 more than this Finance budget shows. Likewise, the Water Fund provides part of the compensation for the city manager’s office, Building & Code, HR, IT — even the city council.

Continue reading Charging the Water Fund for salaries in other departments is a masterpiece of nontransparency

Correction: Pilots, PILOTs & Water

In a recent post about the latest Executive Partners, Inc. (EPI) involvement with the City of DeKalb as its financial consultant, I expressed anxiety about a proposal to privatize the city’s water.

Turns out, that’s not the EPI proposal for the Water Division, and I’m sorry to have led you astray.

It’s a PILOT (not pilot) program. PILOT stands for “payment in lieu of taxes,” and is sometimes spelled PILT as well.

Among EPI’s tasks this round is identification of potential new revenue sources. One of its suggestions is to add up the assets of the Water Division, calculate what Water would be paying in taxes if it were a private company, and then charge us the amount of the calculation.

A preliminary assessment shows net assets and potential annual in-lieu tax payments to be $26 million and $186,000, respectively.

Again, sorry for the error.

I Got My Water Bill Today

Dear City of DeKalb,

I would be OK with your raising my water bill $80 this year if it were going toward something water-related like paying Water Division personnel, replacing water mains or painting towers. Instead, I know much (if not all) of the increase is going — as $500,000 from Water already goes annually — to the General Fund for nonessential stuff you still insist on giving yourselves, such as magazine subscriptions, car allowances, and reimbursed “business” lunches in Opportunity/Innovation Central.

Blood. Turnip. Just sayin’. The borscht train is about to run off the track.

(Yeah, I know: mixed veggies. Long day. I’ll try to do better with the property tax bill.)

More Water Games

Minutes of the January 12 special joint meeting of City Council and Financial Advisory Committee yielded this:

Mr. Espiritu discussed the fund balances along with suggestions to make them sustainable. He recommended that the General Fund build up a 25% fund balance with the City setting aside 5% per year over a 5-year period. Also, the Water Fund should attain a 25% balance with rate raises over a four-year period.

The Water Division has an FY 2010 budget of $4.8 million (PDF pp. 95-97), which incidentally matches up pretty well to the projected water sales revenues. However, it costs only $2.8 million to operate the Water Division. Where does the other $2 million go? Continue reading More Water Games

Water Games

They did it again. Last night at Council (CoW), while discussing the city’s financial outlook, it was reported that the Water Fund is operating at a deficit, and, whew! good thing they raised water rates or else it would be really out of control!

What a crock. The Water Division is a money maker (pp. 96-7). What happens is, the city transfers $500,000-$525,000 every single year to the Black Hole General Fund. In FY2010, the Water Fund will also pay out more than $800,000 in debt service and loan payments. They siphon, then have to borrow money for–what?–repairs probably.

You know, between the debt distributed across four funds, underfunded pensions and that $29.4 million post-retirement insurance liability (which will not even be mentioned until after the budget is passed, unless one of us brings it up) we really are in hock up to our eyeballs. It’s anybody’s guess as to how long this house of cards can stand.

The level of trust we should put in city government, however, is not in doubt at all.