Should Government Agencies Own Private Property

[southsidesignmaker]

Naperville would buy property, not museum

By Jenette Sturges [e-mail] Oct 3, 2010 03:48PM

napervillesun.suntimes.com/news/1826800-418/museum-broad-deal-naperville-million.html


Children play on the Beam Balance at the Children's Museum in Naperville on Wednesday, Sept. 29. | Jonathan Miano~Staff Photographer


In the commotion following the announcement that the city of Naperville may have struck a deal for the purchase of the DuPage Children’s Museum, confusion seems to have set in.

“People are telling me that the city is buying the museum. They are not. They’re buying the property,” said Susan Broad, executive director of the DuPage Children’s Museum.

And that’s something museum supporters ought to be excited about.

“We are very, very pleased that the city is considering the vote this week,” said Broad. “It will be the last piece of a very complicated puzzle that has involved many, many people to keep this museum open.”

In a deal announced by the city earlier this week, Chase Bank, to which the museum owes $9.4 million in encumbrances, is expected to take $3 million from the city for the museum property and the building. State and county funds as well as private donors are contributing another $3.5 million to the deal to ensure the museum’s doors stay open.

In return, the DuPage Children’s Museum will lease the property back from the city, rent-free for the first five years of the 20-year leasing agreement, and about $62,000 plus annual inflationary increases thereafter. Also included in the deal are arrangements for the city to devote 57 spaces to commuter parking for the nearby Metra station, oversight of the museum’s operations by adding two representatives from the city to the museum board and annual review of the museum budget.

The Naperville City Council is expected to vote on the deal at its meeting Tuesday night. If approved, $2 million of the purchase will be paid from unspent funds in the city’s capital improvement plan. The remaining $1 million would come from the Burlington Fund, supported by money from tickets issued at any of the lots surrounding either the Route 59 or Naperville train stations.

Also stipulated in the deal is the cessation of operating support for the museum from the city’s Special Events and Cultural Amenities Fund. The museum received $250,000 from SECA last year, accounting for about 7 percent of its operating budget.

Part of the museum’s budget gap for next year, Broad said, would be filled by the recent award of a grant from the John D. and Catherine T. MacArthur Foundation, totaling $250,000 over five years.

The goal for the museum, both from its board and from the city, is self-sufficiency, Broad said.

“We will not be a line item on the property tax bills like the library or Naper Settlement,” said Broad. “There’s no ongoing support here.”

The City Council meets at 7 p.m. in the council chambers the Naperville Municipal Center, 400 S. Eagle St.

[southsidesignmaker]

A) “We will not be a line item on the property tax bills like the library or Naper Settlement,” said Broad. “There’s no ongoing support here.”

B) In a deal announced by the city earlier this week, Chase Bank, to which the museum owes $9.4 million in encumbrances, is expected to take $3 million from the city for the museum property and the building. State and county funds as well as private donors are contributing another $3.5 million to the deal to ensure the museum’s doors stay open.

In return, the DuPage Children’s Museum will lease the property back from the city, rent-free for the first five years of the 20-year leasing agreement, and about $62,000 plus annual inflationary increases thereafter. Also included in the deal are arrangements for the city to devote 57 spaces to commuter parking for the nearby Metra station, oversight of the museum’s operations by adding two representatives from the city to the museum board and annual review of the museum budget.

The Naperville City Council is expected to vote on the deal at its meeting Tuesday night. If approved, $2 million of the purchase will be paid from unspent funds in the city’s capital improvement plan. The remaining $1 million would come from the Burlington Fund, supported by money from tickets issued at any of the lots surrounding either the Route 59 or Naperville train stations.


____________________________________________________________________________________________


Susan I have a concern regarding the great city of Naperville and your contention that there will be no ongoing financial support from the city's residences.

1) The idea of "0" rent for 5 years sounds like ongoing financial support to many.

2) The idea of having a rent factor of $62,000/yr on a $3,000,000 investment seems "just a bit LOW". Let's take a closer look and measure this sweetheart deal to someone in the residential world. Let us take a $300,000 home as an example: The landlord in this case the city of Naperville would cut a check for $300k, and the tenant would pay appox. $517.00 / month in rent. The tenant would sign a 20 year lease and start to pay rent 5 years into the 20 year lease.


Going back to the city paying 3 million large for this property, the total ROI on this acquisition will be $62,000 x 15 years = $930,000. The article does not mention who is responsible for taxes, insurance, and maintenance.

I would suggest the city revisit this situation as the rent factor is out of sorts on both start time (5 years), and the rent cost ($62,000/ yr). It would be better for the city to represent this for what it is, a gift .... Plain and Simple.

[Arch]

Carillon II.

[macrockett]

Naperville Sun
Pension plans stress Naperville budget
Retirement plans for police and fire employees stressing Naperville's budget, but what to do about it?
Wednesday, August 18, 2010

This is the first in a two-part series on the problem of public safety pensions and their funding.

Naperville's police and fire pension funds tanked in fiscal year 2009.

The Police Pension Fund lost $10.5 million. The Fire Pension Fund lost slightly less than $10 million.

And that's when the trouble really started.

Public pensions are messy business. It's a complex issue of tax burdens, investment returns, unfunded liabilities and other difficult concepts. But this November, it'll be boiled down to one question at the ballot box, when Naperville voters will be asked whether to send a message of pension reform to Springfield.

The problem

"You care because public safety pensions represent 24 percent of your property tax levy," said Naperville City Manager Doug Krieger, "whereas a decade ago, it was only 12 percent."

That number is growing, in short, because Naperville's unfunded liability is growing.

"You look at assets, or how much is in the fund, over liability, or how much is owed to pensioners and how much is owed to employees currently," said Dan DiSanto, assistant to the city manager. "If your assets don't match your liability, you have an unfunded liability."

Police and fire pension funds are paid into from three sources: contributions from the city, deductions from the employee's paycheck and investments. In a defined-benefit pension, when investments fail to turn a profit, it's up to the city to contribute more to make up for the shortfall.

In Naperville, the Police Pension Fund is only 53.5 percent funded. If every police officer in the city's force were to retire today and be added to the already existing pool of retired police officers, the city would be able to pay out only 53.5 percent of what it owes. Likewise, the Fire Pension Fund is 59.2 percent funded.

Naperville's unfunded pension liability, the amount it owes to its current and future pensioners in the police and fire departments, now stands at $101.5 million, and depending on how the markets do, that figure could continue to grow. According to a state law passed in 1993, the city will have to pay that bill, that is, it will have to be 100 percent funded, by 2033.

The result is that as budgets are passed each year, an increasing proportion will have to be put toward funding pensions rather than providing city services.

"This all goes back to 1993," said Don Bisch, president of the Naperville Police Pension Board.

That year, a new state law required the police and fire pension funds be fully funded by 2033, but it also changed the formula for how much cities would be required to contribute each year. Rather than contribute a flat rate each year as they had been doing, cities could contribute less in the late 1990s and early 2000s than they had been previously, based on a percentage of police and fire payrolls. But as the 2033 deadline to reach 100 percent funded approached, the amount cities had to contribute each year increased dramatically.

Bisch likens it to an adjustable rate or balloon mortgage.

"Payments went up and people couldn't afford their payments, and they lost their homes. We don't want to see the municipalities, including Naperville, get to the point where they can't make their payment," he said.

The problem was compounded when the recession hit and investments sunk, leaving the city with an even bigger hole to fill.

The question

Come Nov. 2, Naperville residents will be asked to vote on whether the Illinois General Assembly and the governor should "immediately pass meaningful police and fire pension reform that will reduce the future funding obligation on local taxpayers." The question is non-binding, meaning nothing can change unless the Legislature and governor approve.

Still, it's a loaded and unfair question, for a number of reasons, according to representatives of the police and fire boards.

"Ask a taxpayer if they want to lower their tax burden, and what are they going to say?" said Bisch, the person responsible for making the case for the city's 174 officers and 50 retired officers in the pension system.

There are other reasons police and fire pension representatives are asking residents to vote "No" on the question. It draws comparisons between police and fire positions and other public employees, it fails to acknowledge the history of public pension funding, and because it's not binding, an answer either way wouldn't enact any reforms.

But perhaps most important for voters, the ballot question is nebulous on what shape pension reform might take.

[southsidesignmaker]

Letters: Financially troubled city wants to buy a museum

Oct 4, 2010 07:02PM
napervillesun.suntimes.com/opinions/letters/1813884-474/mental-illness-downtown-naperville-area.html

Financially troubled city wants to buy a museum

A few years ago, as the economy was peaking, I wrote a guest opinion for The Naperville Sun. The key premise was that the city was generating record revenues through the construction of big box stores, mini-mansions, plus accelerated retail sales. Conversely, housing assessments were arbitrarily going through the roof, resulting in outsized growth in our taxes.

City spending shouldn’t have grown in direct proportion to cyclical economic growth. A mini-mansion, big-box store, added retail occupancy, etc. doesn’t require proportionally more fire, police or city support than before. In fact, economies of scale should have been passed on to the consumers (taxpayers) through lower assessment rates.

Of course, that didn’t happen. Our home assessments rose exponentially, while the city budgets followed suit — no program too big to tackle, no department too large to increase and no employee benefits too generous to raise.

Now that the economy and housing values have tanked, the city is in the midst of a budget review. They are supposed to be scrubbing each departmental line item for cost savings. However, we all know that they intend to increase our tax rates to make up for their overspending in good times. It’s therefore interesting to learn that their latest grand budget strategy is to purchase a museum!

Welcome to Wonderland!

Keith Brumbaugh

Naperville


_________________________________________________________________________________


Keith you must remember the city is only considering the purchase of the property. But note the lease rate and terms are a bit under market.

[macrockett]

What the city is doing is buying a building and subsidizing a museum (through free rent for 5 years (who knows what happens after that)). Simple as that. At a time when the unfunded liabilities are $110m and continue to grow...and remember the ROI assumptions? Wait and see how this liability balloons even more than it has already.


From the article I posted above, re Nov 2 referendum:

Come Nov. 2, Naperville residents will be asked to vote on whether the Illinois General Assembly and the governor should "immediately pass meaningful police and fire pension reform that will reduce the future funding obligation on local taxpayers." The question is non-binding, meaning nothing can change unless the Legislature and governor approve.

"There are other reasons police and fire pension representatives are asking residents to vote "No" on the question. It draws comparisons between police and fire positions and other public employees, it fails to acknowledge the history of public pension funding, and because it's not binding, an answer either way wouldn't enact any reforms."

My suggestion, vote yes and bring this travesty to a head. Otherwise anyone growing up in Illinois in the future will have a terrible burden to pay.