New Illinois Campaign Finance Law Reduces Transparency

By Michael Kleen ~ Published October 16, 2013 at the Rock River Times

campaign-finance-scandalChanges to Illinois campaign finance disclosure law will make it easier for political bankrollers to hide behind first-time candidates. Public Act 98-0115, effective July 29, 2013, made several changes to Illinois disclosure law, including a $2,000 increase in the threshold for new political committee formation. That means a candidate can now raise or spend up to $5,000 before he or she is required to file with the State Board of Elections.

Previously, the threshold for new political committee formation was $3,000. According to the Illinois State Board of Elections, “Once it has been determined that your campaign has exceeded $3,000 in either receipts or expenditures… it must file a Statement of Organization (Form D-1) with the State Board of Elections within 10 business days.” (A Guide to Campaign Disclosure, Jan. 2013)

Filing with the State Board of Elections means (among other things) that cumulative contributions from an individual totaling $150 or more during an election cycle must be itemized on a publicly available quarterly report. The donor’s name, address, and the amount of his or her donation appear on that report. If the candidate has not reached the threshold for new political committee formation, however, that information remains private.

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Those Troublesome TIFs

By Michael Kleen ~ Published October 2, 2013 at the Rock River Times

Housing market collapseIn “Trouble with TIFs,” I discussed Tax Increment Financing (TIF), and how TIF districts deprive local governments and school districts of revenue. I also talked about how several studies have shown the unfavorable results of using TIF districts to address blight. In most cases a blighted area was no better off after TIF than it was before, and in some cases it was worse.

There is no doubt that when taken as a whole, Rockford’s experiment with Tax Increment Financing has been a failure. City leaders, however, continue to create new TIF districts and bet on their ability to stimulate growth, despite sobering evidence to the contrary. Not only have TIF districts failed to spur widespread development and raise property values, they threaten to drown our city in a sea of red ink.

In 2010, the consolidated balance for Rockford’s 30 TIF districts was $1.9 million in the red. That deficit was projected to increase to $4.1 million in 2022, before the trend would turn positive. Less than three years later, the consolidated balance for Rockford’s 32 TIF districts was $2.76 million. That deficit was projected to increase to $11.38 million in 2023, before reversing and ending in a small deficit in 2032. This projection was based on 1 percent annual growth of assessed property value and the assumption that no new TIF districts will be created, or no current TIF districts extended beyond their expiration dates.

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Rockford Rewards Failure in Response to Stimulus Fund Scandal

By Michael Kleen ~ Published September 22, 2013 at the Rockford Register Star

CityofRockfordLogoEarlier this month, Rockford City Administrator James Ryan released a memo with his recommendations for how the City should respond to a U.S. Health and Human Services Office of Inspector General’s audit. The audit covered roughly $599,000 in federal stimulus funds Rockford received in 2009. In part, Ryan recommended returning nearly $300,000 in funds that were improperly spent.

Ryan’s memo outlines a clear failure (whether intentional or not) to follow stimulus fund guidelines on the part of Rockford Human Services Department staff. This failure may constitute, at the very least, a neglect of duties.

George Davis, Executive Director of the Rockford Human Services Department, first became aware that the Office of Inspector General was looking into Rockford’s use of federal stimulus funds in the fall of 2011.  He told City Administrator James Ryan, “Given our general accounting practices and Department fiscal procedures I don’t expect that we will have any significant issues.”

Director Davis stated in a letter dated March 5, 2013 to Sheri Fulcher, Regional Inspector General for Audit Services for the DHHS, “…we followed the requirements for documentation as we understood them at the time.” He told the Rockford Register Star on July 26, 2013, “It’s not a case where we had explicit guidelines and instructions and didn’t follow them. We had no unique guidelines.”

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Questions Raised by Stimulus Funds Memo

By Michael Kleen ~ Published September 18, 2013 at the Rock River Times

16310704_sAfter weeks of delay, the City of Rockford finally released the results of its internal review of the U.S. Health and Human Services Office of Inspector General’s audit, which covered roughly $599,000 in federal stimulus funds spent in 2009 and 2010. This memo, written by Rockford City Administrator James Ryan, raises several alarming questions about the possibility of wrongdoing by City staff and its grant recipients. There are, in fact, at least two instances where further investigation may be warranted.

The first demonstrates a clear failure (whether intentional or not) to follow stimulus fund guidelines on the part of Rockford Human Services Department staff, and may constitute, at the very least, a neglect of duties.

George Davis, Executive Director of the Rockford Human Services Department, first became aware that the Office of Inspector General was looking into Rockford’s use of federal stimulus funds in the fall of 2011. He told City Administrator James Ryan, “Given our general accounting practices and Department fiscal procedures I don’t expect that we will have any significant issues.”

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Trouble with TIFs

By Michael Kleen ~ Published September 4, 2013 at the Rock River Times

TIF DebtRockford’s 32 Tax Increment Finance (TIF) districts cost taxpayers $2.75 million in 2012, according to a recent report by Finance Director Chris Black. That deficit was projected to increase to $11.38 million by 2023, before the trend reverses. This alarming news has led to the creation of a committee to look into the financial status of each TIF district. As long as this committee is impartial and objective, it could represent a positive step toward curbing Rockford’s TIF addiction.

What is a Tax Increment Finance district? In short, TIF districts are designed to help blighted areas by diverting public revenue toward redevelopment and improvement in those areas. The property tax allocated to various government entities within a designated district is “frozen” at the point the district is created. Any future increase in property tax revenue is captured in a fund and used to finance public infrastructure or reimburse private developers.

In theory, improvements spurred by the use of TIF will raise property values, which in turn will generate more money for the fund. This is money that would otherwise have gone to other taxing bodies, such as a county government or school district. This effectively deprives them of that revenue for the life of the TIF district. They continue to receive the same share of property taxes they received when the district was created.

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Big Business Payoffs Bring Few Results

By Michael Kleen ~ Published August 21, 2013 at the Rock River Times

govtspendingOn the third anniversary of the Wanxiang solar panel factory opening south of the Rockford airport, Channel 23 News began its story with a sobering fact. “It’s been nearly three years since a solar panel manufacturer opened its doors in the Forest City, a facility that was supposed to bring hundreds of jobs.” In reality, they reported, the plant has only 13 employees. After the segment, newscaster Tina Stein turned to her partner and remarked, “Quite a difference from what was originally promised.”

In exchange for receiving at least $1.2 million dollars in tax increment financing (TIF) funds, $4 million in state grants, 10 acres of land (worth $650,000), and guaranteed government contracts, Wanxiang was supposed to employ 60 people in its first phase alone. “This is the perfect example of how the city and county came together to create jobs,” Winnebago County Chairman Scott Christiansen said in August 2010. Today, the solar panel manufacturing center is barely operational.

Wanxiang Group is China’s second-largest privately held company, with revenues in the billions of dollars annually. Its founder, Lu Guanqiu, is the 33rd richest person in China, with a net worth of more than $1.87 billion. Did Wanxiang really need a few million dollars in public funds to open a factory in Winnebago County?

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Federal Audit Exposes Stimulus Fund Abuse

By Michael Kleen ~ Published August 7, 2013 at the Rock River Times

unclesammoneyhatCongress passed the American Recovery and Reinvestment Act of 2009 in order to use Federal funds to stimulate the US economy, which had tumbled into severe recession. That February, the US unemployment rate hit 8.3 percent. The unemployment rate in Rockford was 14.1 percent in January 2009 and peaked at 20.3 percent in January 2010.

The Federal stimulus package provided $1 billion to the Community Services Black Grant Program for two years, ending on September 30, 2010. The stated purpose of this fund was to reduce poverty, revitalize low-income communities, and help low-income Americans. This would be done by providing services addressing employment education, better use of available income, housing, nutrition, and health.

The State of Illinois awarded Rockford’s Human Services Department $1,062,800 out of this fund. The Office of Inspector General of the US Health and Human Services Department later conducted an audit of how 56 percent (roughly $599,000) of that amount was spent in Rockford and determined that a hair more than one third of the audited funds were unallowable under the Recovery Act. A further $141,796 was deemed “potentially unallowable.” So the audit determined that fully 58 percent of the funds they examined were either unallowable or potentially unallowable.

The unallowable costs included $123,530 that was inadequately documented, $72,669 charged outside the award period, and $9,097 in entertainment expenses. The entertainment expenses included $8,717 for movie theater rental and $380 for paintballing. When the State of Illinois reviewed Rockford’s Recovery Act legers, it found that $6,615 in unused movie tickets was returned to the fund and therefore should have been allowable, but that information did not cause the Inspector General’s office to revise its findings.

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