The River Forest village board received an early $1.2 million Christmas present Monday night, but the good news was dampened by heightened concerns over perceived flaws in Village Administrator Steve Gutierrez’s fiscal management.
Chuck Biondo, the previous village administrator and now a bond advisor to the village, informed the board that by beginning the process of ending the sales tax portion of the village’s tax increment financing district (TIF) early, the village could capture an additional $1.2 million for its general fund in the current fiscal year. That wipes out a $600,000 budget deficit.
Trustees unanimously authorized formal notification to the state department of revenue of its intention to essentially end its sales tax TIF. The move allows the village to immediately begin pumping an additional $1.2 million of sales tax revenues into its general fund this fiscal year, rather than paying the money into a restricted TIF escrow fund.
At the same time, Gutierrez endured sharp criticism of his handling of village finances from a growing number of trustees, several of who pointedly questioned why they weren’t made aware of those circumstances much sooner.
Foreshadowing those concerns, Trustee Steve Dudek asked, “Where did this like, suddenly appear from?” President John Rigas explained that the development came to light during an analysis of the village’s TIF situation conducted by Biondo of the firm Kane McKenna and village staff.
Both Rigas and Finance Committee chair Jim Winikates said it was basically a matter of the village not being able to afford to wait. Rigas characterized remaining under the current TIF fund restrictions as not just being handcuffed, but “shackled.”
Rigas noted that if the board allowed the sales tax TIF to run until its scheduled expiration in December, 2013, the village’s share of property taxes from that TIF would be restricted to use within the TIF as well.
The property tax portion of the TIF is scheduled to expire this December 31, though that too was thrown into question Monday night.
The village faces an additional $600,000 budget shortfall for the current 2009-10 fiscal year, with million dollar plus deficits the following three years. By ending the sales tax portion of the TIF early, the board gains access to $1.2 million that would have been restricted to use within the TIF district and unavailable for general purposes.
“We have the opportunity to increase the general fund by $1.2 million,” said Winikates.
Biondo explained that, under state TIF laws, the state requires the village to deposit the entire amount of projected TIF district generated sales tax revenue into an escrow fund prior to accessing any locally generated sales tax revenue.
“Prior to you obtaining any sales tax in your general fund, you have to deposit all of the sales tax that comes in into the Special Sales Tax Allocation Fund (STAF) until that (projected) figure is met.”
As part of the TIF, the state forgoes its share of sales tax revenue from the TIF area, approximately $116,000 this year. Those monies will be lost to the village, but it can now make use of sales tax revenues immediately, and in the non-restricted general fund.
“I’m suggesting it would be economically prudent to discontinue collecting the state’s portion of the (TIF) sales taxes,” Biondo said.
“Though we’re not totally out of the woods, it makes a big dent,” Winikates said of the additional $1.2 million.
Last minute notice criticized
News of the $1.2 million windfall was tainted in some trustee’s minds by word from Biondo that the village had had until Oct. 20 to formally notify the state department of revenue of its decision to end participation in the sales tax TIF. Biondo was able to convince state officials to extend that deadline to Tuesday.
“Only by the good graces of the state,” said Hoke of the reprieve.
“Why did we find this out today?” asked Hoke. “For 23 years we’ve had a TIF, and now we have to make a decision whether to end it or not, effectively, on one day’s notice,” he said. “I get this tonight and I’m supposed to make a decision? In a long list of administrative issues, this one really takes the cake,” he added.
When Hoke complained that he had “no ability to think it over,” Winikates responded, “Well, what do you want to know?”
“What I’d like is more time,” Hoke replied.
Dudek, who has been a consistently pointed critic of Gutierrez’s administrative acumen, called the short notice “part and parcel of why we don’t know what’s going on,” and “just sloppy, poor management.”
“We’ve been told one thing, then we find out, when we finally get people who know something, that it’s entirely different” Dudek said. “Hopefully, we’ll be able to address that soon.”
Even trustees who have supported Gutierrez in the past expressed concern. “I’m highly disappointed with the administration for giving us this at the last moment,” said Trustee Catherine Adduci.
“I expressed the same frustration in not getting this with not enough time,” said Trustee Susan Conti.
Concerns over the short notice aside, Conti and Adduci framed the issue facing the board. “Apparently, the time is now,” said Conti.
“This makes absolute good sense,” said Adduci.
Trustees also expressed concern that, having been told the TIF surplus would be around $6.6 million, that figure, as of Dec. 31, 2010, was now projected to be $9.5 million. Questions also remain regarding just when the TIF actually expires, and when any surplus funds must be legally committed to allowed purposes under the TIF agreement with the state.
Biondo said “It’s our opinion Dec. 31, 2009 is the date you should commit monies from the TIF,” Biondo said. “There are other opinions.”