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Rock Island and Moline among 20 Illinois cities a watchdog group says should declare bankruptcy

Pension costs are one of the leading causes of these cities’ financial troubles.
Rock Island, photo from the City of Rock Island’s website

SPRINGFIELD, Illinois (Illinois News Network) — Harvey was the first Illinois city to have state tax dollars intercepted by the state comptroller’s office to pay into pension funds. A financial analysis group says more cities are to follow and that bankruptcy may be the best option for many of them.

A new report from government watchdog website Wirepoints shows 20 different Illinois cities that could have tax dollars withheld from daily operations and put directly into pensions. A future report with nearly 200 cities listed is expected soon. In the Quad Cities region, Rock Island and Moline – with total unfunded liabilities of $107 million and $117 million, respectively in 2016 – were among the 20 cities that made the list.

See the entire list of 20 here.

Wirepoints President Ted Dabrowski said most can be saved with appropriate reforms.

“But others like Harvey, like East St. Louis, they need a bankruptcy tool, a bankruptcy option,” Dabrowski said. “Maybe it’s too late for them, but they need one now to be able to work through their problems and become functioning communities again.

Wirepoints founder Mark Glennon said allowing for municipalities to go into bankruptcy will be fair for all and be organized debt restructuring.

As for the state constitution’s pension protection clause, which courts have ruled prohibits Illinois governments from rightsizing government pensions, Glennon said federal law allowing states to greenlight municipal bankruptcies trumps that.

“We only have two ways to address pension contributions,” Glennon said, “either bankruptcy or a constitutional amendment. The constitutional amendment might not work for federal constitution reasons, and would take years to do. Bankruptcy works. Michigan has a pension protection clause too but the bankruptcy overrode it.”

 As more Illinois cities succumb to their pension costs, under a state law tax dollars through the Local Government Distributive Fund can be intercepted by the state comptroller to pay the pension systems. Harvey laid off 40 police and fire department employees as a result.

Dabrowski said there are dozens of other Illinois cities other than Harvey that are shorting their pension funds, but their pension boards have yet to certify that with the comptroller, which triggers the intercept. He says that’s not the responsible thing to do.

State Rep. Jeanne Ives, R-Wheaton, said the intercept essentially accelerates the the financial stresses for the cities. She has a bill to allow municipalities to evaluate reorganization of debt. She said no one wins in bankruptcy, but things will get worse, especially if lawmakers continue to turn a deaf ear toward the issue.

“They’re not going to wake up until outmigration is double what it is now, apparently,” Ives said, pointing to Illinois’ ongoing population loss to other U.S. states. “They’re not going to wake up until property taxes are not just two-and-a-half times the national average, but we have to get to five times the national average everywhere around the state.”

Ives said municipalities from across Illinois are in dire fiscal straits.

“Those top 20 cities [in Wirepoints’ report] aren’t all in one region. They include Oak Lawn, Niles, Dekalb as well as Harvey and Danville,” Ives said. “So they’re all over the entire state of Illinois and they all have different demographics and all have different reasons for why they find themselves in financial stress.”

A subject matter hearing was held Tuesday focused on the issue of bankruptcy, but Ives’ bill allowing municipal bankruptcies remains in committee.

Ives was disheartened by members of the House Cities and Villages Committee who left the room during testimony. She said the issue is too great to ignore.

Dabrowski told the committee that some of the driving factors of uncontrollable debt for cities are unfunded mandates from the state level that don’t allow local officials to run their cities.

“It’s all mandates of collective bargaining, prevailing wage, pensions,” Dabrowski said. “The city councils really don’t have a whole lot of leeway. We like to say we’re local control in Illinois, but try asking a mayor if he or she has local control.”

State Rep. Al Riley, D-Olympia Fields, said while some of the cities may have been managed poorly, there are other factors involved that must be evaluated.

“Relocation of a lot of business and industry in urban centers, and especially in the south suburbs, did a tremendous amount to make these towns go into the spirals that they’re in,” Riley said.

Dabrowski said politics aside, the math of unfunded mandates is fewer services, fewer public safety jobs, and higher taxes for those who choose to stick around.

Greg Bishop reports on Illinois government and other statewide issues for INN.