Kadner: Blue Island faces ‘financial debacle’
By Phil Kadner email@example.com November 13, 2013 9:18PM
Updated: December 15, 2013 11:44AM
Blue Island is facing a “financial debacle,” and letters warning employees of potential layoffs and furloughs went out last week, according to Mayor Domingo Vargas.
During a city council meeting Tuesday night, Vargas announced that “expenses are exceeding revenues” this year by $2.4 million, and the city’s accumulated deficit over the past five years has reached $7.1 million.
During his State of the City address, Vargas, who was elected in April, pointed the finger at the previous administration of former Mayor Donald Peloquin for overspending and borrowing from the city’s water fund and special taxing district accounts with “no plan how to pay them back.”
Peloquin, who was first elected mayor in 1985, told me during a telephone interview Wednesday that while Blue Island has been in financial trouble for years, its debt wasn’t nearly as large as Vargas maintains when Peloquin left office last spring.
“We had an audit, and there was about $750,000 in debt at the time,” he said. “But the state owed us something like $600,000 in overdue tax distribution payments.”
Vargas told me the city also had borrowed from pension funds, but Peloquin said rather than borrowing from the funds, the city simply didn’t keep up with its payments.
“The state has a formula for maintaining the pension fund, as you know, and that includes making larger payments into the pension fund if it doesn’t earn as much interest in certain years,” Peloquin said. “Well, revenues have been flat in Blue Island for some time. We do not have home-rule powers that would allow us to raise tax rates.
“So we have to find the money in other places. We borrowed from the water fund and other funds, but we always paid that money back when new revenues came in from other sources.”
Told of Peloquin’s comments, Vargas said the city did borrow from pension funds and other funds and the money wasn’t always paid back.
“We have another audit coming due, and it will show the entire picture,” Vargas said. “In coming days, I will be meeting with aldermen because even they are not fully aware of how dire the financial situation is. After I have met with the aldermen, I will explain this all in further detail to residents.”
Blue Island is so desperate for money that the mayor has asked the Blue Island Library for a loan of about $1 million. The library has its own board of directors but levies tax revenue through the city.
“We are exploring every contingency,” Vargas said, when I asked him about the library loan. “We have to stop the bleeding, and we’re taking a number of steps to do that.”
He said the city in the past has been refused bank loans backed by tax anticipation notes, but he’s planning to meet with another local bank this week to discuss the situation.
After Vargas read his statement at the council meeting, Ald. Christine Buckner-Cheatle (1st) said, “Many of us were in office when these decisions were made. We voted on these things. It’s time to stop blaming the previous administration for everything and move on.”
But on Wednesday, Vargas (who was an alderman before becoming mayor) told me that aldermen were not fully aware of the extent of the borrowing.
“We weren’t privy to everything that was taking place,” Vargas, an attorney in private practice, said. “The aldermen will discover they didn’t know everything as I share the details of the situation with them.”
He said the main problem seemed to be overspending as revenue remained flat in Blue Island. The rising costs of pensions for city employees, health insurance and payroll were particularly troublesome.
“We are going to stop the bleeding,” Vargas promised residents during the State of the City message. “We are taking drastic action to arrive at a solution to this.”
During a public participation session before Vargas made his announcement, several residents complained about “new hires” and “new positions” created by his administration, claiming that the city spent money on payroll while allowing the recreation center in the California Gardens section of town to deteriorate. They said the recreation center’s roof leaked, the toilets didn’t work and the building had been closed since February.
City Treasurer Carmine Bilotto denied any new hiring, saying new positions were filled by people already on staff and only their titles changed.
One of the people holding a new city job is John Rita Jr., the son of former Mayor John Rita and brother of state Rep. Robert Rita (D-Blue Island). Rita Jr., a former lieutenant in the Cook County Sheriff’s Department, is the public works director at a salary of “about $90,000 a year,” according to Vargas.
“But we don’t have a police chief, and we are very fortunate to have someone with Rita’s qualifications working for us,” Vargas said, acknowledging that critics would suggest nepotism was behind the hire. “He is performing far more duties for us than a police chief — overseeing all aspects of public safety in the city.”
Vargas said furlough notices went out only to nonunion employees and that he didn’t anticipate any layoffs of police and fire department employees, who are union members.
“But we have eliminated overtime, which has saved us a substantial amount of money,” the mayor said.
Vargas touted a presentation at the council meeting by Jen-Care, a company that provides health care services to senior citizens with chronic diseases and that’s negotiating a lease with the owner of the long-vacant Kline’s Department Store building on Vermont Street.
He said a new owner also has been found for the Lyric Theater, 129th Street and Western Avenue.
Blue Island, like many south suburbs, has lost many of its businesses in recent decades and has been unable to replace them.
The bridges at Chatham and Division streets have been shut down to vehicle traffic because the city lacks the money to maintain them.