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updated: 7/7/2011 5:41 PM

Pingree Grove tax district audited by IRS

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Pingree Grove will contract an outside law firm to deal with an IRS audit of one the village's special service area taxing districts.

Earlier this week, trustees decided to contract Katten, Muchin, Rosenman LLP, of Chicago, to respond to the IRS audit by the July 22 deadline. The village doesn't know how much legal bills will cost, but it expects to cover them with SSA administrative fund revenue, officials said.

"Once we do the analysis, we'll know the cost," Village President Greg Marston said.

The village has nine SSAs altogether, and only the Cambridge Lakes South SSA, known as SSA 2, was picked for an audit, Village Administrator Bill Barlow said. SSAs are financing tools municipalities use to pay for infrastructure in a specific area, usually to entice developers to build there. The bonds are then repaid by property owners in that specific area through their tax bills over time.

In 2004, the village issued $23.4 million in bonds to build all the public infrastructure needed for the Cambridge Lakes South subdivision, including streets, sidewalks, and water and sewer lines.

Chicago-based David Taussig & Associates issues the annual SSA reports, but Frieders recommended contracting a different, specialized firm to answer the "specific, technical questions" asked by the IRS. He also recommended choosing a firm that was not involved in any past discussions regarding how SSA money can be used.

"Are there concerns about what they find?" Trustee Brian Paszkiewicz asked.

"It's incredibly unlikely" that the IRS will find the village liable for anything, Frieders answered.

The Daily Herald has filed a Freedom of Information Act request to view the IRS's audit questions.