Aug 012015
 

In 2004, the Naperville city council approved a 1% sales tax on restaurant food and beverages. The tax collected was earmarked for special events and cultural activities, hence the acronym SECA. It seemed like a good idea at the time, and it was. As with just about any good government idea, and there are a few, in the beginning it was used for what it was intended for.

However SECA is a classic example why government programs, and the taxes to support them, never disappear and go away. They just keep getting bigger and bigger until the purpose of SECA becomes its own existence by getting bigger and bigger. The tax created a huge chunk of money, cherished by the City of Naperville. The ‘want’ has now become a ‘need’.

Watch and listen to Naperville councilman Kevin Coyne’s position that SECA has ‘outgrown its purpose and design’:

The city of Naperville has a huge $6.8 million budget deficit and city officials began to address the issue at a recent city council workshop. The only city council member not to attend the budget meeting was Naperville council woman Judy Brodhead. Watch and listen to Brodhead as she clearly states that $2 million is a very small amount:

Brodhead has no problem spending money, especially when it’s not hers. Apparently she doesn’t think she needs to be held accountable for it. Fiscal responsibility has not been a strength for Brodhead. In less than two years Brodhead most likely will be running for re-election and voters will be reminded that she has no problem spending taxpayer’s money.

Now watch and listen to councilman Paul Hinterlong as he suggests keeping a lid on the number of events supported by eliminating a few of those events.

Every group needs at least one person who adds common sense to a discussion, and Kevin Coyne does exactly that for the Naperville city council.  Watch and listen as Coyne suggests stepping back for a clearer view and looking at the budget first before committing to increase expense by adding SECA payroll hours:

This is not a time to be frivolously adding expense to a budget that is already nearly $7 million in the hole. The best thing you can do when you’re in a hole is to throw away the shovel. Somebody needs to confiscate Brodhead’s shovel. If it’s not now, the voters can do it in less than two years.

The vote was 6 to 3 in favor of increasing this expense. Council members voting ‘no’ to the expense were Kevin Coyne, Patty Gustin, and Paul Hinterlong. It looks like a few more shovels need to be confiscated.

  12 Responses to “SECA Getting Bigger For The Purpose Of Getting Bigger”

  1. What nobody discussed here is this slush fund was created and exists to redistribute from one group of tax payers (unequal taxation without representation) and buy support for various politicians based on their doling out the proceeds of this ill gotten gain to their friends and hacks who support them.

    Taxation has always been about wants versus needs and elites deciding how better to spend YOUR money then you. Mr. Coyne is right when he says this program puts the cart before the horse and lets build the road (balanced budget) before running it off the road.

    As a citizen tax payer and voter I would like to suggest the fund be abolished and the 1% sales tax be counted on this industry the same way you are about to tax all other sales and industries to make up your short fall. Naperville is one of the richest suburbs in IL and doesn’t need this type of crutch for any of these supported programs. By its eliminations you also get rig of the graft and corruption and save on one head count.

    If you want to save money may I further suggest you sell off the ambulance service, one of the two golf courses and the new senior citizen’s mega and totally unneeded new facility which will cost additional millions Spare me the juvenile argument that the park district is a separate taxing authority. Lastly the electric company and its IMEA contract should be bundled and sold to people who know how to run a utility without eventually doubling our electric rates and forcing us to jeopardize our homes (fire hazard) and health (RF radiation). With the proceeds pay off our bond debt, fund our required pension plans, cut unneeded staff and return to the city’s citizens their own money to spend, as they see fit, not as you would want it to be.

  2. As I stated during the campaign: • SECA has been a great success, but it needs to change its name to Special Events and Cultural Amenities fund, Slush Fund for the City of Naperville and Slush Fund for the Naperville Park District.

    • The City Ordinance for this fund now states that only 75% of the SECA tax is for the Special Events and Cultural Amenities, with a $2 million cap, and at least 25% is then to be split between the Naperville Police Pension fund and the Naperville Fire Pension fund.

    • The ordinance also states that any remaining funds are to go to the City’s Social Service Grant Program up to a maximum of $500,000 and any remaining money will then be applied to the City’s long term debt obligations.

    • In addition, the latest allocation of money shows that 35%, or $700,000, of the $2 million is already allocated before any other requests from applicants are even considered.

    • In addition, the Advisory commission is not allowing any of the money they allocate to the remaining applicants to be used for salaries even though almost $100,000 of the money is taken off the top to pay for the salary of a City Staff member and City administration costs.

    • The Park District is also receiving money for the Sportsman’s Park and Carillon Maintenance. The Park District already receives money from our Property Taxes!

    So I totally agree with Kevin Coyne. Thanks for you good sense Kevin. Too bad the rest of the City Council did not agree.

  3. The only reason the SECA fund has grown is because the city’s economy has grow. This continuing growth is a testament to the wisdom of past council and city staff decisions. Many of our neighboring communities are not doing as well because they lack this caliber of leadership.

    The $2 million cap on spending was implemented by council to prevent the out of control growth in community events and amenity that would encourage reckless spending. When this fund was establish in 2004 no one expected it to grow to this size, this quickly. A large part of this fund does go to annual/perpetual grants funding the Riverwalk Maintenance & Improvements and the debt service for the Moser property purchase, only a very small part goes to paying staff.

    What to do with the funds in excess of the $2 million was debate at length. It was decided to spend these excess funds in a manner that would best serve the residents of Naperville. Paying down the city’s debt and pension obligation greatly benefits the city by eliminating interest payments (approximately $13 million annually at present). The city is on course to have its pension obligation fully funded by as early as 2017 at present which would make Naperville one of only a couple municipalities in Illinois that can make this claim. There is nothing irresponsible or reckless in using these funds in this manner.

    SECA is defiantly not a political slush fund, anyone that truly believes this knows little about the requirements to request funds and how funding requests are granted.

    Finally the Special Events Coordinator position was created long before SECA and this position has always been funded thru the City’s staffing budget (never SECA funds and no plans to change this funding in the future). A significant number of the events managed by the person in this position do not even get SECA funding and are small neighborhood and church events (block parties, church charity events, etc).

  4. Simple answer: Reduce SECA tax when “too much money” began to be collected. The “excess funds” are essentially a home rule tax on a selected group of businesses. Any taxing body can always find ways to justify the way it spends more money, but has a difficult time figuring out how to reduce its expenses.

    • The council consider the this possibility. At the time of these discussions the city was already facing budget issues and getting indications from the bond rating agencies that the city’s debt was large and continuing to grow (the city presently spends $13 million/yr servicing this debt). The Food and Beverage tax was already in place and using the excess funds to pay down city debt and well as increase city funding of police and fire pensions was decide to be a good way to solve these issues without increase property taxes (in fact during this time the council decreased property taxes by 10%). Using these funds instead of property tax was further appealing because the analysis of who pays the Food & Beverage tax indicated about 50% of this tax was being paid by no residents. Finally the city council has not ruled out reducing this tax in the future when the city’s financial situation has improved.

  5. Next point: “Out of control growth in community events and amenity that would encourage reckless spending.” You mean like the Riverwalk Eatery getting a liquor license and being designated as an Amenity? Guess it also now qualifies for money from the SECA fund. The legitimate organizations that put on events are generally those that serve the public’s social service needs: like Naperville Cares, Loaves and Fishes, 360 Youth Services. Their outside funding has been curtailed due to the poor financial decisions in Springfield and pension liabilities. Money they raise from their events in Naperville help fill this gap. Money donated from the events like Ribfest is given to these types of organizations.

    Jim, how about identifying the reckless spending of the social service agencies, agency by agency? I think the reckless spending is by government (like the City of Naperville and the Park District and the State of Illinois), not agencies trying to help the disabled, elderly and mentally ill, as well as the citizens and families in Naperville who have lost their jobs and homes due to the economic downturn. Unfortunately, these are citizens employed in the private sector, not the public sector.

    I hope the decisions to give money to these types of agencies is not politically based during the SECA deliberations. What is politically based in the City of Naperville are the decisions that are causing problems at our two utilities.

    • First the meetings that produced SECA were held with representative from these service groups you mentioned and they were an active element in determining the qualifications for and process to receive SECA funding. Your asking me to “identify the reckless spending of the social service agency…” tells me you were not involved in or following what was happening with SECA at the time of these concerns. First, it was a concern that reckless spending could happen not that it had. The red flag was SECA receiving requests for funds that were to be used to pay for salaries, travel and equipment. Nothing in SECA rule prevented funding these requests but it was agreed by SECA members that is was not the intended purpose of this fund when it was created. Those arguing in support of funding these request argued the funds were available and the score of funding should be increase. Obviously this argument lost out and the decision was made not to broaden the score of this organization funding.Since members from these volunteer/social service organizations seat on the SECA committee that makes funding recommendation to the city council it is unclear how these deliberations would become politically based.

  6. And lets move on: You state ” It was decided to spend these excess funds in a manner that would best serve the residents of Naperville. Paying down the city’s debt and pension obligation greatly benefits the city by eliminating interest payments (approximately $13 million annually at present)”

    Per the City of Naperville’s Legislative Update to the Naperville Chamber dated November 10, 2014, $1.5 million, rounded, is the amount of money paid from SECA for Police, Fire and Social service funding. Garbage fees forgone because the City believes other people should pay for the garbage collection of residents equal $5 million. $5 million less $1,5 million leaves $3,5 million to be used for debt paydown. Per the legislative update, the increase in debt payments is $5.3 million over two years. If a project could not have been paid for without raising taxes, then it should not have been undertaken.

    In my opinion, the SECA tax can easily be lowered and the City does not need a new sales tax that could easily shut down a major source of income for the City of Naperville. I know I shop where the sales tax is lower and have done so for years.

    • This post is a mix of information from different and unrelated meetings and reports.

      First how the garbage collection contract is paid has nothing to do with SECA. Presently residents using city refuge collect are paying $2 per month when the cost to the city is $12.35 per month per user. The $5 million difference is presently being covered by the city’s general fund (mostly sales & property taxes – but not food & beverage tax which goes directly into the SECA fund). This is the way it has been for many years. The staff’s recommendation is to increase the fee charged by $10.35 so that those using this service are paying the full $12.35 cost to the city of providing this service. I reiterate this has nothing to do with the SECA fund or how it is spent.

      The SECA funds, over the $2 million reserved to fund events and amenities, are presently being used to fund the police & fire pensions and city debt. Presently 75% of these funds are spent on pensions and 25% on city debt the actually dollar amounts change each year depending on the funds available. If your $1.5 million number for pensions in 2014 is correct then and addition $500,000 would have go to pay down city debt. The goal of spending these funds in this way is to get the city fully vested in the Police and Fire Funds earlier then the presently committed budget funding plan will make possible (like making extra principle payments on a loan/mortgage) and saving the city penalties it pays for these pension being underfunded. This is similarly true of the payment from this fund for debt service, it is a payment above and beyond what the city is committed to in paying these bonds and will result in retiring them early saving the city tax payer the cost of interest payment that would be made if these bonds are not retired early. Since this funding source is separate and segregated from other city funds/revenues it expenditure does not directly impact the city budget (indirectly by reducing revenues that would have been spent to pay interest and penalties).

      Next, it is not a matter of simply not funding a project. A loins share of city funding is spent on supporting, maintaining, repairing and improving existing infrastructure. This infrastructure grew rapidly as the city grew and most of it was paid for by developers, but keeping this infrastructure operational is expensive (if not maintained you get pot holes like Chicago, power outage, sewer backups and storm water flooding). Projects like lining sewer and storm water pipes prevents flooding and is less expensive then replacing these pipes in the future, when they fail, then fixing then today and preventing this failure. Replacing arc street lights with LED lights reduces operating cost (saves money on the city’s electric bill) and reduces maintenance requirements (saving labor costs). These are only two examples of the what you call “project…..should not be undertaken”.

      Finally, even with the implementation of the staff recommended HRT the sales tax in Naperville will be lower then in our neighboring communities, which means you will be continuing to shop in Naperville along with resident from these surrounding communities.

  7. Tax and spend? Spend and then find taxes to cover the “excess” spending? Or another source to cover the spending spree? Money comes int from many sources and is put into a big pot. That pot is then divided and goes out to pay bills. Makes no difference how the money comes in. What makes the difference is whether or not the “free” money from taxpayers is enough to cover the expenses of the non-income producing government entity – other than fees they charge for services. Also, you now presume to advise me that you do not care if I have to spend more money in sales tax because it will still be lower than what I would pay elsewhere? Wow. Really?

    Please also do not presume to lecture me about our public utilities. That was my business for 30 years and I was on the PUAB for 6 years. Money for the public utilities is generated from the rates paid by users of the services. not taxes. Intermingling of these funds with City of Naperville funds and construction projects is not supposed to be done. In fact, our two Directors, Mark and Jim, have always maintained that this has not been done whenever I broached the subject.

    • The only part of your response that has anything to do with any of my postings is your comment: “you now presume to advise me that you do not care if I have to spend more money in sales tax because it will still be lower than what I would pay elsewhere? Wow. Really?” with regards to my statements on HRT. Your response is not even close to anything I said. You implied that HRT would raise sales tax in the city to the point it would be cheaper for you to shop outside the city, My statement pointed out that sales tax in Naperville would still be cheaper then surrounding communities and if taxes are you only motive in choosing were to shop then you would continue to shop in Naperville. I, at no time advised anyone that I do not care if they pay more in taxes. I do care how much Naperville residents pay in tax since I am one of those residents.

      My statements in this stream have focus on SECA funding for the most part, since that is what the related article was about. I could be convince that a discussion of co-mingling of city funds is relate to this stream if evidence existed that the city was doing this, but none does. When a government entity states funds collect from a particular source are to be earmarked for a specific expense then that is the only legal expenditure these fund can be used for, in fact state and federal funds received by the city require documentation of expenditures to prove such funds are being properly spent. If you truly believe all the funds that coming to the city get co-mingle and can be spent anyway the city wants then you know very little about government standards of practice, accounting requirements and the legal requirements of handling public funds. If, however, you can provide more then speculation or accusations, say proof, that the city is not handling funds in a manner required by law, please share it with all of us.

      The part of your post about public utilities seems to indicate you are not aware that Capital Improvement Projects (CIP) like increasing city’s electrical supply capacity, upgrades to power delivery infrastructure, and other similar aspect of the city’s water and sewer system are all funded by bond issues (the source of Naperville’s large debt which the city wants to retire early using HRT) and not by utilities usage fees paid by the residents. These fees mostly cover daily operating expenses with a small potion place in a reserve to cover unexpected costs relate to each utility. It has been the city’s policy for decade to cover all CIP expenses with bond issues. (Read the last couple of budgets they on available through the city website)

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