Lack of Transparency Leads to Lack of Trust

Another "Blast from the Past"

it was December 2009...

Months before it was revealed that the DuPage Water Commission had spent down nearly $20 million in financial reserves, board member Liz Chaplin of Downers Grove had attempted to alert her colleagues of the potential for a looming shortfall.

In a series of June e-mails, Chaplin pressed financial administrator Max Richter for the 2009 operating loss and the projected loss for 2010-11.  “The loss from regular operations has been steadily climbing and at some point will overwhelm the sales tax and investment income,” she wrote.

“Since it appears that there is no plan in the near future to increase the rates to meet our bond obligation and charge what it costs to operate the system and fund the bonds, how long can the commission continue on with this misguided reliance on sales tax to fund the system?” asked Chaplin, who represents District 2.

It took nearly a week for Richter to respond to Chaplin’s questions, stating that “the operating loss for FY 2008-09 will be $24.9 million prior to any auditing adjustments” and future operating losses were projected to be $16.8 million in 2009-10 and $18.9 million in 2010-11.

Chaplin asked about the projections again in August and once more in September, but “there was no time to get it on the agenda.”

On September 12, Chaplin e-mailed several colleagues, noting that Richter had projected the losses would overwhelm the commission’s sales tax and interest income by 2019-20.

“I believe this is an important issue that is not being presented to the board and needs to be discussed to determine if the commission should be looking into this issue, since I am sure our sales tax revenue and interest income is down more than projected,” she wrote.

Richter reportedly was forced to resign from his post in October after it was discovered money from the fund had been improperly allocated. 

The discovery was made when the commission’s former financial administrator, Richard Skiba, filled in during Richter’s medical leave in September. Richter hasn’t been accused of any wrong-doing.

The commission recently brought in outside investigators to determine what happened to the reserve and is considering raising rates to the 30 municipalities and unincorporated areas it serves by as much as 42 percent.

“We sell water cheaper to the municipalities than we buy it from the City of Chicago,” Chaplin told the DGreport. “As the municipalities’ rates were going down, our rates were going up. We never passed that along to the consumer.”

Chaplin said she became concerned this year because sales tax revenue and investment income had decreased due to the recession.

“Sales tax was never meant to be used as a subsidy for rates, but to build the infrastructure to bring water from Chicago to DuPage County,” she said. The quarter cent tax had been approved in a 1985 referendum that also allowed the commission to issue $150 million in general obligation bonds.

Eventually, the commission had accumulated $198 million in sales tax revenue. In 2003, legislation was passed forcing the commission to transfer $75 million in sales tax income to the county in order to offset its budget shortfalls.

Despite that, the commission acted to reduce rates by 12 percent in 2005. “We had so much money, we gave to the county, reduced water rates and rebated $40 million to the municipalities two years ago,” said Chaplin, who had attempted for more than five years to convince the commission to drop the sales tax.

“The municipalities want the rate low and no one really asked questions,” Chaplin said. “There was no accountability of the staff.”

Meanwhile other commissioners would commend the staff for its stellar performance, she said.

With the exception of some Naperville commissioners, “board members don’t ask questions,” she said. 

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“Board members want to be popular more than they want to do what’s right.”

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Chaplin, an eight-year veteran of the board, also ran afoul of popular opinion by questioning other commission practices and expenditures.

She questioned the commission’s budget presentations (aside: recently the Lisle Library Director defended the deficit spending budget for FY 13-14 saying the budgeted expenditures were less than the previous year's budget) , which until recently compared figures on a budget-to-budget rather than budget-to-actual basis. 

She questioned the commission’s practice of spending as much as $18,000 on tuition reimbursement for individual staff members — “Why is that the taxpayers’ problem?” — and was successful in getting the maximum benefit reduced to $4,000.

She also criticized thousands of dollars in expenditures for employee recognition luncheons, “book talk”  events, redundant educational programs, and the annual holiday luncheon and commission holiday party.

And after being rebuffed in her requests for receipts for $4,600 in office supplies purchased in March and April 2008,Chaplin filed a FOIA for the information. 

She learned commission staffers had received more than 400 gifts from suppliers.

These are among the ethical concerns Chaplin would like to see addressed by the board. “I’ve asked that we look into getting an outside ethics officer,” she said.

“The lack of transparency leads to a lack of trust,” Chaplin said. 

“When you serve on a board and people aren’t willing to answer questions, as a board member you become more and more leery of what’s going on.”

DGReport.com

http://www.dgreport.com/index.php/2009/12/07/swimming-against-the-current/