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Southern Illinois mayor says cities across the state face insolvency from pension debt

Illinois Watchdog.Org

Monday, May 14, 2018  |  Article  |  By Cole Lauterbach - Illinois News Network

Local Government (60) , Pensions (70)
A southern Illinois city is selling off municipal property to deal with its unfunded pension debt.

The Metro East city of Alton is growing. Businesses are expanding or buying new locations. The local hospital is expanding. Alton has been selected as the site for a new reality show that will invest in small businesses there. 

“We’ve really turned the corner,” Mayor Brant Walker said.

Alton also is dealing with a massive pension bill. To that end, the city is in the process of selling off its water treatment plant. The Alton City Council accepted American Water’s $54 million bid for the plant last month.

All of the proceeds would go toward paying Alton's $113 million in unfunded pension liabilities. Every one of Alton’s 24,000 residents would owe more than $4,700 to pay off the liability. Walker said that, without that money, Alton would be insolvent like suburban Harvey.

“I know the state of Illinois says you can’t go bankrupt, but if you don’t have any money, what do you call it?” he asked. “If we did not have the influx, almost $54 million, Alton would no doubt be Harvey.”

Harvey's recent mass layoffs of police and firefighters have been a forewarning for municipalities across the state struggling to hold the line on operations while paying the minimums on millions of dollars in unpaid pension bills. Harvey was forced to lay off dozens of public safety workers after Comptroller Susana Mendoza’s office was compelled by local pension stewards to withhold more than $1.4 million in state tax distributions the city was owed.

“There will be a lot of Harvey’s coming down the pike very soon due to pension funding shortfalls,” Walker said. “Kankakee’s in trouble. Harvey’s in trouble. The list goes on and on.”

Kankakee officials voted in March to raise the municipal sales tax to help pay off the city's coming pension tab. The city's annual minimum pension contributions accounted for more than a quarter of its budget in 2016.

A recent report from government finance watchdog Wirepoints predicted 200 more cities in the state could face similar problems.

This is the first year that pension managers can have what’s owed to the pension fund withheld from money owed to a city by the state, potentially crippling a town’s finances.