Home Agency Gave Interest-Free Loans to Director

Part II of an investigation with the Chicago Sun-Times looks at two interest-free home-improvement loans given to Kenneth Pannaralla, a director at a government-run home-equity assurance program.

While overseeing the largest of three government-run home-equity assurance programs in Chicago, Kenneth Pannaralla got two interest-free home-improvement loans through his agency worth a total of $15,000, despite a ban on such benefits under state law.

The Southwest Home Equity Assurance Program used property taxes it collects to pay the interest on the loans Pannaralla got from Marquette Bank, under a home-improvement loan program the agency created 11 years ago, records show.

In addition, Pannaralla and his daughter, Jennifer Pannaralla, currently have another zero-interest home-improvement loan through the agency, this one for $10,000.

That, too, appears to be in violation of the Illinois Home Equity Assurance Act, which says: "No commissioner or family member of a commissioner, or employee or family member of an employee, may receive any financial benefit, either directly or indirectly" from the program.

The little-known agency Pannaralla oversees is one of the three created under a law Illinois legislators passed in 1988 to curb white flight in Chicago’s bungalow belt. The law guarantees that homeowners who signed up by paying for an appraisal wouldn’t lose money if they sold their homes even if property values declined, as long as they waited five years to sell and as long as property values went down for reasons other than a national housing slump, as has happened.

The agencies have differed on whether homeowners should be paid at all. Many of those who’ve benefited from the law meant to keep people in their homes in the city have ended up being paid, in effect, to move out of Chicago.

Pannaralla got his first interest-free loan for $5,000 in November 2002, when he was one of nine unpaid commissioners appointed by Mayor Richard M. Daley to run the home equity assurance program.

He got another loan for $10,000 in June 2004, a month after he became the program’s executive director, a job that pays him $74,983 annually.

Pannaralla has repaid both of those loans on his home in the 6500 block of South Kostner.

He and his daughter got another interest-free loan in June 2008 on her home in the 6100 block of West 59th Street. It’s due in 2013.

Since 2000, the Southwest Home Equity Assurance Program has operated a home-improvement loan program using money it collects in property taxes from the Southwest Side district it covers to pay all of the interest on loans up to $10,000. The program pays part of the interest on loans up to $30,000.

Under the program, 815 homeowners have obtained loans financed by Marquette Park or Prospect Federal Savings Bank, which then collect part or all of the interest from the Southwest Home Equity Assurance Program, which is funded by property taxes paid by 61,145 homeowners. The program has paid $833,202 in interest since it began.

To be eligible for an interest-free loan, homeowners must be enrolled in the home equity assurance program, which compensates people whose homes sell for less than the "guaranteed appraised value" set by Pannaralla’s program. The program has paid homeowners as much as $155,000 when their homes sold far below appraisals that typically were done several years before.

Pannaralla acknowledged benefiting from the program he oversees but declined to discuss the propriety of the loans.

Other homeowners who have gotten interest-free home-improvements include former Ald. Frank Olivo (13th); his brother, August Olivo Jr., who works for Cook County; and dozens of other government employees, primarily Chicago police officers and firefighters.

ADDITIONAL COVERAGE

Ex-Madigan Worker Gets $213,418 From City Pension, Three Government Jobs

Kenneth E. Pannaralla — once a top precinct captain for Illinois House Speaker Michael J. Madigan — has made a good living in government.

Pannaralla, 63, gets a pension from the city of Chicago in addition to the three paychecks from his three current government jobs, including one as the executive director of the Southwest Home Equity Assurance Program, a government agency created under a law Madigan co-sponsored.

Madigan, who is also chairman of the Illinois Democratic Party, also gave Pannaralla’s daughter, Jennifer Pannaralla, a one-year legislative scholarship in 2003 to the University of Illinois at Chicago. And Pannaralla’s son, Kenneth, is paid $24,000 a year as an aide to Madigan.

Pannaralla makes a total of $213,418 a year, including:

  • A $94,551 yearly pension from the city of Chicago, where he worked for 28 years, retiring under an early-retirement program passed by the Madigan-led Illinois Legislature that allowed him to buy an additional five years of service. Half of that pension goes to Pannaralla’s ex-wife under their divorce settlement, court records show. Pannaralla, who has a bachelor’s degree in microbiology from Chicago State University, served as chief sanitarian for the city’s health department under former Mayor Richard M. Daley. Pannaralla was later promoted to first deputy commissioner of the city’s building department. He retired as a $105,396-a-year deputy commissioner of the planning and development department on Feb. 29. 2004.
  • A $74,983 annual salary from the Southwest Home Equity Assurance Program, where he’s been executive director since May 2004. He previously served on its board of directors, appointed by Daley in November 2001.
  • A $32,779-a-year salary from the village of Bridgeview, where he’s a part-time manager of property development and management. He’s worked for Bridgeview for 20 years, having started as a health inspector at the same time he was chief sanitarian for the city of Chicago. "My assignments in the village of Bridgeview," he says, "have included, among other things: health inspections, food-borne illness investigations, establishment health reports, complaint investigations, new-establishment licensure inspections, business-plan reviews, tax-increment financing district development, new-business procurement, various committee assignments, Toyota Park stadium development assignments, various property-management tasks and other related assignments as requested by both Mayors [John] Oremus and [Steven] Landek."
  • A $11,105 annual salary from the village of Alsip, where he has been part-time health commissioner since April 2006. "He basically supervises our health officer," says Alsip Mayor Patrick Kitching. "He’s not here on a daily basis. . . . All he does is look over the shoulder of our health officer and fulfill a legal requirement for us" to have a microbiologist on staff.

Pannaralla also has two unpaid government posts. He’s a member of the Illinois Board of Health Practitioners. And he serves on Chicago’s Midway Noise Compatibility Commission, one of three people representing Madigan’s 13th Ward.

Madigan didn’t respond to a request for comment about Pannaralla, who lives near Madigan.

Pannaralla acknowledges his longtime relationship with Madigan, saying: "The speaker of the House of Representatives, Mr. Michael J. Madigan, has been the elected representative in my home district for many years. I once served my neighbors as a volunteer precinct representative in my neighborhood for over 25 years. I do not serve in that capacity currently.’’

SPECIAL INVESTIGATION WITH THE CHICAGO SUN-TIMES

This two-part series follows the money trail of three little-known government agencies established in the late-1980s to offer financial assistance and incentives to Chicago homeowners in certain neighborhoods.

PART I: Taxpayer Money Set Aside to Curb White Flight Helped Some Flee Chicago

PART II: Home Agency Gave Interest-Free Loans to Director>

These articles were written and reported by Robert Herguth, the BGA’s editor of investigations, and Tim Novak and Chris Fusco of the Chicago Sun-Times. To contact Herguth, call (312) 821-9030 or email rherguth@bettergov.org.