DeKalb District lawyer wants to compromise with city on TIF audit findings

DeKALB – The DeKalb School District 428 board is offering to compromise with the city of DeKalb instead of suing the government over tax increment finance money they said the district lost out on after the city used the money for other purposes.

The city and surrounding taxing bodies will have the opportunity to address the district's offer among other things at the Joint Review Board meeting set for 1 p.m. Friday at the DeKalb Police Department, 700 W. Lincoln Highway. Those attending in person will be required to wear a face mask or covering, and those who wish to attend virtually may do so via Zoom using the following link us02web.zoom.us/j/88206237718?pwd=TWNhSS82M08reXVOb1RjTkpaWE9jdz09 and the meeting ID: 882 0623 7718.

District 428's lawyer, Gino Galluzzo, said Tuesday he'd reviewed the completed forensic audit of the city of DeKalb's TIF spending and recommends the city pay back what it owes to the taxing bodies using the tax increment finance district known as TIF 3.

"I'm going to push Bill [Nicklas] that they should pay that out of the TIF," Galluzzo said. "My recommendation is to work a compromise and talking to the city manager and city attorney I think that would be possible."

The audit, released May 28, reviewed the city's TIF spending since 2008 and shows the city used $7.9 million in TIF funds to offset salary costs. The audit also showed the city lacks consistent and complete record-keeping for TIF spending, and was including sales tax revenue in the TIF surplus to grow the increment, which auditors say needs clarification as to whether that complies with Illinois' TIF Act.

In response, City Manager Bill Nicklas has said that he was not surprised by the audit's findings, and said the city is already addressing much of the recommendations handed down by Ernst and Young.

He called the administrative spending "excessive," and said the city no longer authorizes transfers like that.

Galluzzo said he recommends the school district scrap an existing intergovernmental agreement regarding TIF 3 which currently dictates no surplus will be provided to District 428 from that TIF – the smallest of all three of the city's TIFs, which only encompasses the downtown strip – and instead craft a new one which will allow the city to surplus funds from TIF 3 and pay it to the school district.

Galluzo – who back in 2018 discovered the city had misspent $11.2 million in TIF money which should have been surplussed to the taxing bodies – said if the audit had gone back further to 2000, auditors would have seen the amount incorrectly surplussed to the city of DeKalb itself and the state was actually owed to the taxing bodies.

Galluzzo said, if the school board approves, he'd ask the city to eliminate any surplus distribution out of TIF 1, which would require an amendment to the existing intergovernmental agreement, and then take those dollars and shift it to TIF 3 so that it can grow and be distributed out to the taxing bodies.

"By shifting dollars to TIF 3 and helping it be more successful, we'll be able to have more surplus, distribute to the taxing bodies, have dollars available that technically the city could otherwise control," Galluzzo said. "It would put us in a better position than we were when we lost the $11.2 million."

He said he'd also like the city to be more transparent with the type of records they provide to the JRB members, so that the data is easier to understand and actions such as the ones discovered in the audit do not happen again.

"They identify everything in there but it requires tons of ours to really understand what's happening," Galluzzo said. "It doesn't change the fact that they were able to take $11.2 million, they were able to keep that and never paid it back because they don't have the money to do so."