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Dixon a city on the brink before arrest

Layoffs were in works; financial pain ran deep, but ‘city survived’

Published: Saturday, Dec. 8, 2012 1:15 a.m. CDT • Updated: Saturday, Dec. 8, 2012 1:14 p.m. CDT

DIXON – Just 5 days before FBI agents arrested Rita Crundwell at City Hall in April for taking nearly $54 million from the city since 1990, Shawn Ortgiesen called his weekly meeting of department heads.

Layoffs were discussed.

“We were all feeling that there was no money,” said Ortgiesen, the city’s public works director. “We were trying to figure out more ways to generate revenue for the city or ways to not do layoffs. Fortunately, it never came to that.”

This week, the city’s new finance director, Paula Meyer, reported that operating funds had plummeted from $10.6 million in 2002 to negative $19.7 million at the time of Crundwell’s arrest – a $30 million swing in one decade.

In the past decade, the city went from a desirable surplus of funds, with the ability to pay for city improvements, to pure survival mode, all while Crundwell enjoyed a lavish lifestyle.

The general fund, which pays for most operations, including police, fire and roads, had sunk to $5.7 million in the hole. Loans were obtained to pay bills, and that debt climbed to more than $12 million. The City Council was forced to borrow off anticipated tax collections for the third year.

Streets were not improved, until a pothole developed. Improvements to the water system were not made until after a main break. Both police and fire departments were short-staffed, and stains from water leaks were left unrepaired on the walls of City Hall.

“We weren’t able to be proactive,” Ortgiesen said. “We were reactive.”

Not only were city budgets feeling the pinch, but pay for city employees was frozen. Retired employees were not replaced. Negotiations with the city’s unions were conducted on a year-to-year basis, instead of every 3 years.

As the hole grew deeper, the city was running out of answers.

“There are limits to what you can do once you get to this point,” Meyer said. “There’s limits to what you can borrow, limits to what you can levy in taxes based on your EAV [equalized assessed value – total amount of taxable property]. It had to either reduce spending or increase revenue.”

That’s when possible layoffs were brought to the picture.

Even though Police Chief Danny Langloss said his department was short-staffed in comparison to other communities of similar size, one officer who recently returned from military service in Afghanistan was near the chopping block.

“There was a great deal of concern with all the city’s departments before [Crundwell’s] arrest,” Langloss said. “Who was going to lose their job?”

Her arrest came not long before the city’s budgets had to be set and possible layoffs would be issued.

“That’s a testament to all the department heads; nobody lost their job,” said Fire Chief Tim Shipman. “We did what we were able to do with our budgets to prevent that from happening.”

The financial pain, however, was felt across the city’s departments.

Ortgiesen highlighted the kind of infrastructure projects that were not being completed.

For example, the wastewater treatment plant needed two new screws for its lift station, so the City Council was approached for the money. Those screws, which were rusting and long overdue for maintenance, pull up sewage from underground to start the treatment process. If any of them were to malfunction, homes or businesses would back up with sewage.

The $80,000 project was never done.

“We never had the money to do it,” Ortgiesen said.

Now, public works will proceed with the maintenance at a cost of about $400,000.

Crumbling downtown sidewalks, deteriorating streets, and the loss of part-time summer help also made Ortgiesen’s list.

For the police department, those tighter budgets prevented upgrading of the radio system, purchasing new bulletproof vests for its technical response team, replacing outdated laptops in squad cars, and hiring more staff.

“There’s several dead spots with our radio system and the dispatcher in certain spots of the city,” Langloss said. “We have to send more than one officer out to these areas, because it’s quite the safety issue. This has been a problem for 15 years, and we’ve never had the money to fix it.”

The fire department would not have been able to update safety equipment if it wasn’t for more than $640,000 of grants, Shipman said.

“I don’t know where we would’ve been without those,” he said.

Despite those money problems, the city was not on the brink of filing bankruptcy, according to Rory Sohn of WIPFLI, who is reconstructing the details of the amount taken by Crundwell.

The city is left with about $22 million total, including landfill, sewage and water department funds, which make up almost $20 million of that total.

“It’s not a good position to be in, but it was not close to bankruptcy,” Sohn said. “They still have 90 percent of their funds coming in on a yearly basis.”

So where does that leave the city?

All negative funds will have to be balanced, debts paid off over the course of time, and several neglected but necessary infrastructure and public works projects addressed, Sohn said.

The city is expected to receive about $7 million to $10 million from a sale of Crundwell’s assets and any cash it receives through litigation. And it has experienced a growth of $3 million in cash flow since her arrest.

Consultants Stan Helgerson and Dave Richardson, who were hired to help with city finances after Crundwell’s arrest, advised the City Council to pay off its debts before it takes on any capital projects.

They suggested paying back about $7 million owed to the motor fuel tax, downtown development, band, Oakwood Cemetery, civil defense, working cash, water, sewer, Illinois Municipal Retirement System, Social Security and emergency vehicle funds, which Crundwell is assumed to have moved to an account she used for personal expenses.

“The idea that the city would have any extra money from all of this was not realistic,” Richardson said. “She was taking money from the city’s internal funds, used to operate the city.”

Ortgiesen offered one positive.

“We survived.” he said. “Nobody was laid off, and we were able to do what we could to keep the city running.”

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