Sales tax dispute reignites between McLean County and Bloomington and Normal

A legal cease fire between the Town of Normal and City of Bloomington on one side and McLean County government on the other is showing signs of collapse, with the two sides once again appearing headed for court.

The dispute, which is nearly two years old, centers on shared sales tax money dedicated to behavioral health programs, jail expansion bond debt and public safety information systems. Just over a year ago, the parties appeared headed for court. That scenario now looks possible again.

In March, the two sides agreed on a memorandum of understanding for an audit of expenditures from the county's Mental Health and Public Safety Fund and approved a good faith gesture to temporarily suspend transfers of new shared revenue to county control. That memorandum came eight months after the initial agreement to conduct the audit.

The underlying issue is that the city and town believe the county is collecting too much sales tax money, more than the city and town thought they would ever pay. The county has maintained it is spending the revenue according to a decade-old intergovernmental agreement. The city and town disagree with the county on the amount and nature of some of the spending.

Audit results returned in August, and the governmental bodies said the findings offered a basis for continuing discussions. Those talks have not taken place, according to various elected officials and staff. The fact that the city and town have now hired an outside law firm to handle the matter, along with a letter acquired under the Freedom of Information Act, suggest why.

"The County's wrongful conduct has deprived, and continues to deprive, the City and the Town of the basic benefit of their bargain," said Hart Passman, an attorney with Elrod Friedman LLP, in the Sept. 1 letter.

Elrod Friedman is headquartered in the South Lawndale neighborhood of Chicago. It specializes in representing local governments and private developers in land use and government law, according to the firm's website.

The letter renewed the confrontational language and the city and town claims from a year ago that the county "violated the letter and spirit of the IGA."

"The county's continued refusal to spend the Pledged Revenues or negotiate in good faith are egregious abuses of discretion that frustrate the basic purpose of the IGA and deprive the city and Town of any meaningful value from it. These abuses have unjustly enriched the County to the detriment and injury of the City and the Town," Passman said.

The letter also claimed that there is a "considerable funding glut" caused by not spending the money, and that a "wrongful diversion of interest prevents the Mental Health and Public Safety Fund from organically growing over time."

"The County has diverted nearly $1 million per year in interest generated by the Pledged Revenues into separate accounts," Passman said.

The county has used interest generated from short-term investment of the unspent amounts in its general fund. The county has asked the Illinois Attorney General to clarify which of two state laws should apply to how the county should handle the interest income.

The letter also renewed claims that spending on salaries for some jail guards does not qualify under the intergovernmental agreement, and that some of the spending on information systems for units within the county should not come from shared revenue.

"The County's stockpile of unspent Pledged Revenues of approximately $20 million, and this abuse of discretion, is in breach of the requirements of the IGA," Passman said.

The city and town issued a deadline of mid-October for the county to "commence substantial steps to comply with the IGA" and cure the breaches.

"Although we prefer to avoid a lawsuit, the County's failure to recognize the seriousness of its shortcomings and my clients' resolve may leave no other option," Passman said.