Public Watchdog.org

Stiffed By The TIF

02.14.13

At Monday night’s Park Ridge City Council Committee of the Whole meeting, the Council got further confirmation – as if even the most hapless alderman needed it by now – that the Uptown TIF could remain a money-sucking albatross around the City’s neck for the remainder of its 23-year life.

Or for another 13 years, to be exact.  Assuming it’s not extended.

That was the word from the City’s outside TIF consultants, Kane McKenna and Associates, who told the City that by May 1 of next year the City’s TIF Fund will be in hock to the City’s General Fund by about $6 million.  While one fund owing another a boxcar number might sound like the creative accounting and mumbo-jumbo that comes out of Washington D.C. when discussing the federal government owing hundreds of billions of dollars to “Social Security” for loans that the SS “trust fund” made to keep the government operating, it’s real dollars to us average taxpayers.

The problem is a simple one: back in 2003, then-mayor Ron Wietecha and a recklessly “motivated” City Council borrowed and spent way too much on the Uptown TIF District Redevelopment project – selling themselves on the pie-in-the-sky revenue projections provided by the developer, PRC Partners; by our disingenuous then-city manager, Tim Schuenke; and by local realtors and retailers, many of whom were hoping the project would give their own businesses the jump-start they were desperately looking for.  Oh, and maybe some local real estate speculators, who saw the new project as a way to goose up the values of neighboring property and scalp a quick profit.

Kind of like those speculators who were buying up or optioning all that land in and around the expected venues for the “guaranteed” Chicago 2016 Olympics.

Compounding the problem of those ridiculous revenue projections is the strong possibility that the City sold off the City land on which the bulk of the project sits – the old reservoir block – for as much as two or three million dollars less than it was worth.  That’s because our irresponsible public officials were so consumed with getting the project done that they threw caution (and/or common sense) to the wind, and didn’t even get the property appraised.

Brilliant!

The City then undertook a lot of infrastructure expenses in furtherance of the project, and as a favor to the private developer.  It issued a bunch of long-term bonded debt and pledged all the City’s assets as security for that debt.

For the first few years the TIF bumbled along with nobody paying close attention or publicizing its performance – because then-Deputy City Mgr. Juliana Maller, who nominally was in charge of keeping track of the TIF, was clueless and uninterested; and because reliable information was next to impossible to come by, probably because such information would have become increasingly embarrassing for the culprits still sitting around The Horseshoe and harboring further political (or commercial?) ambitions.

Not until Allison Stutts became Finance Director and took over TIF analysis from Maller did Mayor Dave Schmidt and the new Council start to get some of the unhappy totals – and it became increasingly apparent that the City needed some TIF experts to advise if anything could be done to improve the situation by refinancing or other creative tactics.

According to Page 16 of the Kane McKenna report (which also is available on the City’s website under the 01.11.13 City Council meeting attachments), the City currently is on the hook for over $39 million in additional TIF debt service.  But that’s far from the worst part of the report.

On that same page, in that same table, Kane McKenna forecasts three separate alternate scenarios, with the best one projecting that the TIF will end up costing the City $7.4 million.  The worst case scenario: The TIF ends up $27 million in the in the hole.  And, as the consultants note: “The imbalance between TIF revenues and obligations…is significant”; and none of their suggested action plans is “a complete remedy.”

If you watch Monday night’s City Council COW meeting video on the City’s website, you will hear the Kane McKenna representative discuss how these scenarios were drawn up with a conservative underlying premise of no growth in sales and property tax revenues, which is unlikely.  But even building in an equally unlikely 4% annual growth in such revenues, the deficit in the “special” TIF fund could still end up at $10 million or so, to go along with the locked-in $7.35 million cumulative obligation to the school districts and the Park District under all three alternative scenarios.

Fortunately for all the perpetrators of this goat rodeo but one (current Ald. Rich DiPietro), these revelations come when they no longer are public officials.  And if you ask them about how they could have been so wrong about this project – for which they were planning on as much as a $20 million-plus profit by the expiration of the TIF’s 23-year term – you can expect more songs and dances than the original Broadway production of “Cats.”

But the bottom line, especially as we move into the final months of the mayoral and City Council races, is that it looks like the TIF will continue to be a major drain on City finances for the foreseeable future, the proverbial 500 lb gorilla sitting in the corner of the City Council chambers at every meeting.  We therefore encourage all taxpayers/voters to press all the candidates for City office on how they view this problem, and demand specific answers about what they intend to do to address it.

Mindless, pie-in-the-sky irresponsibility by City officials brought us to this place.  Does anybody but the village idiot(s) think more mindless pie-in-the-sky irresponsibility will get us out of it?

To read or post comments, click on title.

22 comments so far

I know that Schmidt constantly talks about the TIF debt and how to deal with it, but do you know what Schmidt thinks about the TIF?

EDITOR’S NOTE: We suppose you meant “Ryles” instead of your second reference to “Schmidt.” And when it comes to what Ryles knows about anything, you need to ask Howard Frimark.

Thanks for the stroll down memory lane. It’s a really good recap of what happened. How can we apply these lessons in the here and now?

If, as you suggest, Larry Ryles is following instructions from Howard Frimark, then we should re-elect Dave Schmidt.

Meanwhile, the park district, already in hock for $10 million, wants us to borrow $13.2 million more to buy the Youth Campus.

No thank you. The park district keeps saying how cheap the youth campus will be, but thinking about the TIF episode, $13.2 million will be just the beginning.

EDITOR’S NOTE: “Those who do not remember the past are condemned to repeat it.” Santayana.

We’ve got no problem with the Park District’s going to referendum on the Youth Campus, irrespective of whether or not it’s a good idea. We do have a problem, however, with how the Park District didn’t send the new Centennial Pool to referendum – a move that convinced us this current Park Board, unlike any other one since 1994, has thinly-veiled contempt for the taxpayers and the voters; and that the Youth Campus referendum is not a matter of principle but of necessity.

I do not understand the excuse of the negative effect of assessed values being decreased by 12% a couple of years ago. The State Equalization Factor Committee raised my equalization factor on my house up by 12 % so that there was no reduction in taxes on my house because of it. What am I missing? Did Commercial Real Estate get treated differently….or what happened? Thank you

EDITOR’S NOTE: We’re not exactly sure what you’re saying, or asking. The TIF’s ability to cover the TIF debt service was based on projections of an initial EAV and tax level, along with substantial EAV growth and commensurately increased tax revenues, none of which came to pass.

Was it all the real estate bubble that led to the bad projections? Also, are there unoccupied units in the TIF, that once sold, the debt comes down?

EDITOR’S NOTE: The “debt” never comes down, other than by its being paid down.

The bursting of the real estate bubble surely didn’t help things. But the public officials who perpetrated this boondoggle did exactly what the dumbest residential real estate purchasers/speculators did at around that same time: overextended the City and put it (and us taxpayers) at the mercy of the vagaries of the real estate market and credit markets.

Steve-That is what I thought when I read the recap of the Uptown TIF. The PRPD has no option but to put te Youth Campus acquisition to the voting taxpayers given the purchase and development cost of $13,200,000.

But where the PRPD does have some flexibility is in creating an estimated income statement for the operations of the Youth Campus. The estimte on the PRPD website magically comes in at a small profit based on estimated user fees and expenses to operate and maintain the Youth Campus. How convenient. Yet the PRPD estimates have no detail whatsoever. How were their revenue figures arrived at? What programs and costs are included-especially in the category “Maine Park”?

Let’s not be fooled again in to approving another multi-million dollar project that will really only tangibly benefit those who live in close proximity to the proposed park. There is already a park right across the street from the Youth Campus at their disposal.

The PRPD is foolishly wanting to take on a debt load that can only be paid back by the already over taxed and over user feed taxpayers of PR.

Money does not grow on trees-VOTE NO ON APRIL 9!

EDITOR’S NOTE: The real problem is that, putting it bluntly, most of these Park Board members and staff simply can’t be counted on to be both competetent AND truthful. Consequently, you can assume that the Park District’s “business plan” for the Youth Campus was reverse engineered from the desired goal of showing “a small profit,” and constructed with whatever funny numbers it took to get there.

The same thing was done by the City with the Uptown TIF, except that the City reverse engineered its projections from a goal of showing a much larger profit.

That’s why, generally speaking, bureaucrats LOVE incompetent, go-along-to-get-along elected officials – and hate competent, “difficult” public officials who challenge the bureaucrats’ actions and hold them accountable.

I have tried to plow through some of the report. I do not understand the issue of the negative effect of assessed values being decreased by 12% a couple of years ago. The State Equalization Factor Committee raised my equalization factor on my house up by 12 % at the same time so that there was no reduction in taxes on my house because of it. What am I missing? Did Commercial Real Estate get treated differently….or what happened? Thank you

EDITOR’S NOTE: The TIF finances were based on lofty initial EAV estimates and taxes, along with aggressive increases in both. Flat or declining EAVs, with flat taxes, doesn’t fit the bill.

Adding to the EDITOR’S NOTE after the third comment: They did this all while they guaranteed not only payment of the debt via the City’s General Fund BUT ALSO while they also guaranteed payments to D207, D64 and the Park District irrespective of how the TIF performed financially. So here the City sits today stuck not only paying back borrowed money with interest it is paying the three other Park Ridge governmental entities payments based on projections that will never never never come to pass.

The TIF was originally projected to produce over $40 million of income to the City over its 23 year life. Now, in the absence of some near miracle, it is projected to end its 23 year life owing the City anywhere from $15 million to +$20 million.

I don’t think it’s reasonable to blame this potential +$50 million swing on the real estate bubble.

EDITOR’S NOTE: Exactly!

And to close the analogy circle completely, the City cut those deals with those other governmental bodies to buy them off so that they wouldn’t contest the legitimacy of the TIF (i.e., that the TIF area was “blighted” and, “but for” the TIF, it would never be redeveloped.

District 64 spent some decent money on a top-flight municipal attorney, John Murphey, who told the D-64 Board that it could defeat the TIF with a court challenge because Uptown didn’t meet the TIF criteria. But the go-along-to-get-along D-64 Board wimped out and agreed to be bought off by the City.

Fast forward to the Youth Campus project, where we hear that the Park District and Mel Thillens’ Legacy crew are trying to buy off various factions with promises of a “free” building (to the Historical Society), sweetheart deals for the sports affiliates, and now this made-to-order “business plan.”

Meanwhile, who’s advocating for the taxpayers?

Editor-what sweetheart deals for the sports affiliates? Don’t they (baseball, soccer, football) currently only pay $10 per participant per season to use the PRPD maintained fields? The only sport currently run through the PRPD (the PRPD collects the participant fee not some separate but affiliated entity) is Lacrosse. Please explain.
Thanks.

EDITOR’S NOTE: More fields/facilities with no extra cost is a form of “sweetheart” deal.

Last we heard, the basketball program also was run directly by the PRRPD.

Thanks for the response. That is ridiculous. Thanks Mr. Thillens.

I appreciate that the TIF debt problem is finally getting the attention it deserves. I have mentioned it repeatedly over the past few years as one of the primary reasons I have not not been reluctant to use my veto pen.

The four consecutive budget surpluses we will generate in the General Fund during my first term as mayor are not just welcome, they are CRITICAL, because it is only from those surpluses that we had and will hopefully have funds available to pay our annual TIF obligations. That is why I will continue to advocate for very tight controls over spending even as we generate surpluses. It is the only way we can hope to survive the avalanche of debt that is descending upon us.

I should clarify my recent post. We do not pay all of the TIF’s debts from the General Fund. Rather, we use General Fund dollars to make up the difference between the TIF’s annual debts and the TIF’s revenues which have been and will continue to be insufficient to pay the TIF’s annual obligations.

Or Mr. Mayor you could simply raise my taxes and plow the stinking streets in this town. I drove one night from Niles, through Park Ridge and into Chicago. Niles-great, Chicago-decent, Park Ridge-sucked. You’ve micro-managed all the services to death in this town. Even a 10% rise in the city portion of my tax bill, which would be a huge percentage, would amount to about $130 per year increase. I’d much rather pay that than be killed trying to pick my kid up from school. Stop nickel and diming everything!

EDITOR’S NOTE: Or you might point out to us exactly where in the budget it shows that the public works budget for snow removal has been cut during Schmidt’s tenure, because we’re not aware of that happening. And while you’re at it, feel free to point out what other specific services (besides the irresponsible and unaccounted-for private community group handouts) have been cut, and how those cuts have hurt services.

And, by the way, do you know that mayoral challenger Larry Ryles claims he wants to cut tax increases even further than Schmidt has? How does THAT float your boat?

Of course, Ryles hasn’t yet explained what he would have cut over the past three years to have kept tax increases at the rate of increase in the CPI – other than, perhaps, his heretofore secret plan to bring a lot of new retail to town.

As TIF obligations become due, there will be even less funding available for snow plowing. Besides, I’m not aware that any failure to plow snow was due to inadequate funding. Park Ridge’s TIF payments are going to hit the taxpayers hard. The Uptown development is not producing the revenue that was projected. Taxpayers are on the hook for the shortfall. As we learned Monday, there might be some mechanisms by which the debt can be temporarily ameliorated. But, the debt obligations cannot be avoided.

Steve S., do you have any financial duties at your job? If you are allowed to make purchases for your department to a limit of $500, do you take that $350 purchase to your boss to get approved? Thought not. Stop with the paranoid name-calling. The Park Board has exercised its legal authority, not exceeded it. And SMR/Editor, “more fields at no extra cost” is what Park Ridge Soccer GAVE to the Park District and District 64 when it DONATED nearly a half-million dollars to field improvements at Emerson. Is that a sweetheart deal? Or only when you want it to be one?
I hope none of you ever go to Houlihan’s, or Treasure Island, or Bluefish, or Amphora, or….
wouldn’t want to give aid and comfort to the enemy. Just drive on down the road to Edison Park or Old Orchard or…and give them your sales tax revenues.

EDITOR’S NOTE: Are you truly clueless, or intentionally trying to mislead the truly clueless?

Comparing a private-sector $350 purchase with the Park District’s $7.1 million purchase – financed with $6.3 million of 15-year bonds – for a new Centennial aquatic center is nothing short of idiotic – which means it’s a notch below imbecilic, two notches below moronic, and three notches below cretinous.

Ditto for your reference to the Uptown TIF financial black hole as a smart trade-off to losing sales taxes to “Edison Park or Old Orchard.”

But at least you redeemed yourself with your comment about the Park Ridge Soccer affiliate having “DONATED nearly a half-million dollars to field improvements at Emerson.” You seem to think that Park Ridge Soccer actually EARNED that money (from a new soccer shoe design it invented and licensed to NIKE?) and altruistically gave it to the Park District for the Emerson fields – when in fact it collected that money by charging extra for its programs for a few years leading up to that “donation.” So it was really the TAXPAYERS who put their kids in those programs who “donated” the money to build the Emerson fields. And that makes your comment merely ignorant…unless it’s also intentionally misleading.

To call everything purchased with revenue collected from Park Ridgians “TAXPAYER” funded is misleading. By that same rational, so are the Ianelli Studio, Mary Seat of Wisdom Schooling, and the barstools at Perry’s. Once a taxpayer voluntarily decides to pay for a something, those payments aren’t taxes.

EDITOR’S NOTE: Idiocy redux. Ianelli Studio, MSW and barstools at Perry’s are private, meaning that anybody who contributes to them does so voluntarily. If taxpayers with kids wanted their kids to play soccer back in the pre-Emerson Fields years, they were compelled to pay fees that included a premium for the eventual “donation” for the Emerson Fields. Hence, the “donation” was by the taxpayers, even though Park Ridge Soccer claimed the credit.

Anonymous at 3:04-in 2011, the PRPD spent $1,271,221 on maintenance related costs for the parks, including tennis courts and fields, while collecting only $22,800 in revenue from “affiliates.” While clearly not all of the $1,271,221 is for baseball, football and soccer field maintenance costs, the affiliates should be paying more than $22,800 a year to the PRPD given how much the affiliates use these PRPD owned and maintained fields.

Promising the affiliates more access to more fields owned and maintained by the PRPD- in order to get the affiliates to back and push the Youth Campus referendum- without increasing the $10 per participant per season fee is an example of the PRPD using taxpayer money to give a deal to a few special groups.

As a user of the programs the affiliates provide, it is our responsibility to pay for these additional costs so if they raise the participation fee-so be it.

EDITOR’S NOTE: What a novel concept: user fees that actually cover the cost of the usage. But it sounds subversive, smr.

When did the PRPD make this “promise” to the affiliates? I never saw or even heard of this conversation. In fact I heard there was discussion about increasing PRPD revenue from the affiliates due to the Youth Campus purchase.

EDITOR’S NOTE: The PRRPD officially didn’t make any promises to anybody because the current management and Board are too clever (and/or dishonest?) to be that overt – and risk losing either the sports affiliate voters who are hoping for more and better facilities that OPM will pay for, or the non-affiliate voters who might finally realize that THEY ARE THE SUCKERS EXPECTED TO PROVIDE THE OPM.

But if you’re interested in a chuckle, take a look at what the PRRPD is pawning off as its “Operating Budget Summary,” which can be found at http://www.prparks.org/sites/default/files/youth_campus_operating_budget_summary_for_web.pdf. Just a bunch of numbers with absolutely no back-up whatsover and, unfortunately, par for the course.

Splash pad $38,000 income. Huh??

EDITOR’S NOTE: Hey, that’s only 152,000 splashes at $.25 per splash. It could happen.

Dear Anon. from the 16th at 3:04 pm:

If you re-read my comment above, you won’t find any “paranoid name-calling” or any accusation that the Park Board exceeded its legal authority. I only pointed out that they’ve already borrowed $10 million and now ask to borrow $13.2 million more. The connection to the TIF topic is that taxpayers always seem to get stuck with a bigger bill than promised.

Just because I oppose $23.2 million in public debt doesn’t mean I consider anyone an “enemy”. That’s a rather harsh word you used. All the more so since I’m quite involved in the community and indeed I shop at the local stores you mentioned.

Actually, there’s one store you mentioned where I do not shop: Treasure Island. As far as I know there is not one of those here in Park Ridge.

Sorry, Steve – I meant Trader Joe’s. All this talk of filthy lucre got me fixated on “treasure!”

wtf??? on 02.17.13 1:35 pm:

I wondered too about this splash pad, but apparently the Golf Maine Park District has one. I guess with rising water prices, it may be cheaper to pay for a Splash Pad pass than to use your own hose and sprinkler:

http://gmpd.org/parks_and_facilities/splash_pad/

EDITOR’S NOTE: Apparently the PRRPD caught some flak for their laughable “Operating Budget Summary” for the Youth Campus project, because it now has a “Detailed Operating Budget” that, although a major improvement over the summary, still looks like fun-with-numbers.

For example: How many platform tennis memberships, and at what price, will the PRRPD have to sell to hit the $15,000 of projected revenue (100 @ $150, 300 @ $50, or 5 @ $3,000)? What kind of “programs,” at what price, and for how many participants, will be required to hit the $26,800 of projected revenue? How many “rentals” at what rate will it take to get to $5,000?

For example: How many kids and at what price will it take to realize the $78,750 “Preschool Extended” revenue projection, or the $70,200 “Nature Center Preschool”?

Just remember, folks: The Uptown TIF was sold to the taxpayers as a sure-fire, multi-million dollar profit generator – using funny numbers a lot like the Youth Campus ones.

$38,000 splash pad revenue…
At $2 a visit that would be about 180 kids a day visiting the splash pad 30 days a month for 3.5 months. Fat chance. Even if you rework those numbers in some reasonable fashion.

And I’d love to know if the PRPD splash pad will have the “amenities” that the GMPD has that will make it a draw:

Great for Family and kids of all ages
Dump Buckets
Water cannons to spray your friends
A Tot-Mister and Aqua Dome
Several ground geysers and water jets
2 Shade structures and benches

Doubt it.

As they say, I want some of what the PRPD is smokin’.

EDITOR’S NOTE: No you don’t – unless you want to become an irresponsible bureaucrat or a rubber-stamp board member.



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