DeKALB — The DeKalb Tax Increment Financing Joint Review Board reconvened Friday to discuss a recent forensic audit on the city’s use of tax increment finance spending, which found TIF funds of $7.9 million being used to balance salary costs from 2009 to 2018.
This was the board’s first meeting since Jan. 24 after multiple attempts to reschedule were canceled due to the COVID-19 pandemic.
A 66-page forensic audit, conducted by Ernst & Young LLP, was published May 27 detailing the city’s use of TIF funds. A TIF is a way for the city to help finance various companies through taxes for a project site or for redevelopment within the city.
The audit was initially conducted after concerns were raised about a significant surplus in the city’s TIF 2 account and certain General Fund transfers over the life of TIF funds, according to the audit. The General Fund is a fund for all activity that hasn’t been assigned to a specific fund and is then put toward the General Fund.
For the forensic audit, documents from 2009 to December 2018 were reviewed. Key findings of the audit include using $7.9 million in TIF funds to balance salary costs and using sales tax incremental revenues in the TIF surplus to collect more money. The audit also showed the city had missing record-keeping documents for TIF funds.
Michael Stavridis, an auditor from Ernst & Young LLP, said the audit was challenging for the firm to work on because they struggled to get proper documentation from the city to conduct the audit.
“In our findings, we call attention to the fact that there isn’t a clear policy document or set of process documents that show payments to vendors or the owners of the developments,” Stavridis said.
From 2009 to December 2018, 85 payments were made, however, 16 invoices were missing and proof of performance for 71 transactions couldn’t be provided, according to the audit.
The city had two TIF funds: TIF 1 and TIF 2. TIF 1 was “established to improve blighted conditions within designated of the city,” according to the audit. TIF 1 has a budget of $39.5 million and was set to expire in 2009 but was extended for an additional 12 years.
TIF 2 was established to fund economic development in certain areas of the city that were previously in a state of decline with “deteriorating properties and a loss of commercial business,” according to the audit. TIF 2 had a budget of $23.1 million and was in place for 24 years and expired on Dec. 31, 2019.
City Manager Bill Nicklas said going forward, he hopes the joint review board will be focused on good projects that will build the incremental value of the assessments in different TIF areas of the city.
“As an administrator who’s inherited this problem, I regret it mightily every day,” Nicklas said.
The joint review board will meet again on July 24 to discuss the audit in further detail on how the city can go forward after the audit, Nicklas said.
Because the joint review board, which is made up of representatives from local taxing bodies, reviews plans for tax increment financing districts in the city, they don’t hold any policy-making power.
DeKalb County Administrator Gary Hanson said as a DeKalb County representative, he has to think of the taxpayers in his county who subsidized the errors the city has made.
“I can’t look at this audit and just simply walk away and say, ‘well, we got to do better,’” Hanson said. “I think we still have to look at where this has left us.”