Concerns raised in East Chicago audit

The action against the group Healthy East Chicago was reported in a 2014 audit of East Chicago conducted by the State Board of Accounts.

The loans were for the purchase of property from the city's Department of Redevelopment.

According to the audit, the unpaid principal balance owed was more than $1 million on Oct. 1, 2010. Additional principal payments haven't been made.

Beginning in April 2011, the Department of Redevelopment received interest-only payments for the period from November 2010, through Aug. 15, 2013. Auditors said in July no additional payments have since been received.

"Governmental units have a responsibility to collect amounts owed to the governmental unit pursuant to procedures authorized by statute," according to the report.

Healthy East Chicago owns an office building at 100 W. Chicago Ave. in East Chicago. It programs include depression screenings, smoking cessation classes and nutritional programs for young mothers.

Healthy East Chicago denies it is in default under the terms of its mortgage and has filed its own suit against the city for nonpayment of rent. The city said it stopped making payment for offices rented by its Department of Health at the building after Healthy East Chicago stopped making payment on the mortgage.

East Chicago attorney Joseph Allegretti said negotiations are ongoing. He said the loan was one of the things inherited by Mayor Anthony Copeland when he took over, and it is something he wants to resolve during his tenure.

Adam Decker, the attorney handling the case for the city, said it has been basically on hold while talks are held.

"We've been in negotiations on how best to resolve this and we're still in those discussions," he said.

The audit noted a lack of money generated from a few  tax increment financing districts, such as TIF property tax money pledged to repay $9 million in TIF revenue bonds issued in 1999 to finance equipment purchases for U.S. Gypsum Co.

Tax increment finance property taxes received in 2014 were not enough to cover payments due that year, according to the audit.

A similar situation exists with another TIF district issue used in 2007 to finance the costs of converting a retail structure in Riley Plaza into a supermarket.

James Bennett, the city's financial adviser, said in both cases the city is under no obligation for the bonds, which he said were purchased by U.S. Gypsum and the supermarket firm.

The audit also said the redevelopment department did not provide the oversight when it came to some outside contractors administering Section 8 Housing Assistance Payments Program. Bennett contended these were procedural mistakes, saying oversight was provided, but documentation was not properly initialed.

Bennett said auditors "have to find something" and that in comparison to what was seen in audits of a number of years ago, that "it is a very good audit."

The audit also pointed out the city's self-insurance fund had an overdrawn cash balance of more than $2 million at the end of last year. A similar problem was noted in an earlier report.

The audit report states, "Routinely overdrawn funds could be an indicator of serious financial problems, which should be investigated by the governmental unit."

The city said it has been "actively pursuing alternatives to correct the deficit balance."