ELWOOD — The city of Elwood has misused tax increment finance funds to the tune of nearly $1 million, according to a report issued earlier this month by the State Board of Accounts.
But Elwood’s attorney, Jeff Graham of Graham, Hopper, Farrer & Wilson, responded that the city does not agree with the state because the money was used to encourage economic development.
However, he added, the city will not be required to repay the funds but will find other ways to pay for these items in the future. He expects a solution for the management fees will be found before the start of the 2020 golf season.
“The city is looking forward to getting this in compliance with the SBA’s view and intends to do so very quickly,” he said. “It certainly makes more sense to comply with the SBA’s view when we can do that because it’s a lot cheaper than going to court.”
According to the supplemental report dated Dec. 4, the city’s Economic Redevelopment Commission improperly spent more than $61,400 on police vehicles and more than $900,000 on golf course management fees between Jan. 1, 2017, and Dec. 31, 2018.
“Our tests were not designed to identify all the instances of noncompliance; therefore, noncompliance may exist that is unidentified,” State Examiner Paul D. Joyce wrote in an Oct. 23 letter to Elwood city officials.
According to a much-cited lawsuit by the city of Munster in Northwest Indiana, TIF funds may be used for economic development activities prior to the completion of a project. However, they may not be used for operational costs.
In his written response to the state dated Oct. 30, Graham said the police cars should be considered an allowable TIF expense because the ERC concluded enhancement of public safety is vital economic development and redevelopment.
“The ERC is aware that other cities have similarly concluded that the enhancement of public safety is critical to meeting such goals,” he wrote. “The purchase of the police cars in 2018 served the goals of the economic plan and, therefore, payment from TIF funds was proper and in compliance with Indiana statutes.”
Graham further wrote that the only way the proposed Cattails subdivision would be possible is through the restoration of the abandoned golf course.
“Although the ERC’s determination has already borne fruit in the way of a $20,000,000+ housing project, the subdivision is still in need of further redevelopment as contemplated by the ERC in 2016,” he wrote. “As such, the expenditure of TIF funds for the management of the golf course, which is an exclusive method to redevelop the surrounding area, is a proper use of TIF funding and is distinguishable from the facts in the Munster case because the project has not yet been completed.”
The letter was written in the unsuccessful hope of changing the SBA’s mind prior to the release of the supplemental report, Graham said.
Elwood Clerk-Treasurer Allison M. Roby, an independently elected official, said she signed the checks believing the ERC and its attorney’s conclusion that the police cars and management fees were a lawful use of TIF funds.
“You can’t ever pay for mowing. So we pay the contractual people, and they pay the people who mow,” she said.
She said the TIF fund currently contains $543,324.68.
Roby said all her audits were in compliance, but she was concerned the supplemental report might be a blight on her record, though Graham assured her it’s really a black eye for the ERC.
“We knew with the ERC being brand-new, there would probably be some issues, but nothing like this,” she said. “If the general fund is the people that would have to pay that back, it would fall on me.”
All the bills for both projects already have been paid, Roby said.
“There’s no way to pay it back,” she said. “They didn’t make us pay it back – this time. I don’t know what will happen next time.”
She said from past experience she has learned that even if she disagreed with a body that has directed her to pay for goods and services, her only recourse is to issue the check with a statement of protest.
“I feel like we will be able to work it out, but I am going to stay in close contact with the State Board of Accounts,” she said. “We’ll be changing it, or I just won’t sign stuff.”