North Riverside mayor: 'Radical' change needed

Hermanek says pension burden is 'imploding' village

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By Bob Uphues


Facing a pension-funding crisis, the North Riverside village board finds itself in a position where it may look to privatize some village services — potentially its fire department — in order to balance its budget.

No decisions have been made, but the village board's finance committee is scheduled to meet June 30 at 6 p.m. in the council chambers at North Riverside Village Commons, 2401 Desplaines Ave., to come up with a path forward.

"We have to do something radical," Mayor Hubert Hermanek Jr. told the Landmark during an interview on Saturday. "Nothing is off the table."

Hermanek said the "radical" idea is expected to come out of discussions at the finance committee meeting. The village's attorneys are already working on possible scenarios, Hermanek indicated.

"I expect an idea to be presented that will be able to nip the pension crisis in the bud and have a future solution for the village," Hermanek said.

The June 30 finance committee meeting will follow in the wake of a hearing before the Illinois Department of Insurance that village officials have been ordered to attend at the Department of Insurance, 122 S. Michigan, 19th floor, in Chicago on June 26.

According to Kimberly Parker, communications manager for the Illinois Department of Insurance, the hearing is being convened to allow North Riverside to present a course of action for coming into compliance.

"I cannot predict the outcome," Parker said. "Obviously, in such cases, it is our intention to work with the municipality to get them back in compliance."

In February 2013, the Department of Insurance issued a notice of non-compliance to the village regarding North Riverside's contributions to its police and fire pension funds.

North Riverside was one of five municipalities to receive the notices last year. At the time, North Riverside was warned to "take immediate steps to bring itself into compliance" with the state pension code.

Since 2008, North Riverside has paid just a fraction of its pension obligations; for four years running, the village paid nothing into its pension funds. During the 2013-2014 fiscal year, which ended April 30, North Riverside contributed about $340,000 to its police pension fund and about $223,000 to its fire pension fund.

In order to fully fund its police and fire pensions for the 2014-15 fiscal year, North Riverside must contribute about $1.8 million.

On Saturday, Hermanek said that's exactly what the village wants to do.

"My hope is that we will completely fund the pensions," said Hermanek. "It's going to be difficult."

That's because if the village is to fund both its pension obligations and maintain village services at their current levels, the village will see its general operating reserves cut by almost $2 million.

That would drop the village's general operating reserves to just about $2.1 million, which represents about 13 percent of annual expenditures. And that reserve would disappear completely by 2015-16 if service levels remain unchanged and pensions are funded completely.

"We would have a balanced budget if it wasn't for the pensions," said Hermanek. "It's imploding the village. We have to do something out of the box. It's not fair to residents to cut services and lay off people to make our pension obligations."

A 2011 state law requires municipalities to meet its fire pension obligations. If a municipality doesn't meet those obligations, according to the law, the state comptroller in 2016 will deduct up to "one-third of the total amount of any grants of state funds to the municipality" to cover the shortfall.

In 2017, that amount jumps to one half of any grants of state funds; in 2018, the comptroller can deduct the total amount to meet the shortfall.

In 2014-15, the village's fire pension obligation is almost $744,000 and is projected to rise to $950,000 by 2016-17. Officials project spending $4.74 million (including the pension obligation and a $612,000 line item for paramedic services) for fire protection in 2014-15.

The village board still hasn't approved a budget for the present fiscal year, which began May 1. And the board hasn't made any final decisions on service cuts or delays in capital expenditures.

Those decisions will be finalized after the June 30 finance committee meeting, according to Hermanek. According to state law, the village must pass its annual appropriations ordinance, which is based on the budget, by the end of July.

But the board has made one budget decision, which will directly affect residents and businesses. For years the village substantially subsidized water service, freezing customer rates for many years while the village was hit with rate increases by the Brookfield-North Riverside Water Commission.

The village in recent years has raised rates somewhat, but not nearly enough to keep up with substantial increases being passed along to the suburbs by the city of Chicago. As a result, the village's water fund has been running annual deficits in excess of $350,000, leaving the general operating fund to make up the difference.

In many municipalities, the water and sewer fund operates at a surplus. Those funds are then used to maintain the water and sewer systems.

At a special village board meeting that's been scheduled for June 23, North Riverside trustees are expected to increase water rates by $1.50 per 1,000 gallons of water and impose a $15 per month "water operations fee" on all residential and commercial water customers.

The increases are expected to bring the village an additional $800,000 to its water fund.

"That will get our fund, for the first time in memory, in the black," said Hermanek.

A draft version of the 2014-15 budget shows the village is predicting sales tax revenue will recover after coming in substantially below expectations in 2013-14. During the last fiscal year, sales tax revenues fell short of expectations by almost $720,000.

But officials are hopeful that a full year of sales at Costco, a new Chick-fil-A, Red Robin and other new retail businesses at the Costco outlots will cause sales taxes to rebound.

This story has been changed to correct the address of the June 26 hearing at the Illinois Department of Insurance.

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Reader Comments

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Linda C Sedlak from North Riverside, IL  

Posted: June 24th, 2014 2:33 PM

That should have been Linda C Sedlak from North Riverside, IL not Chicago.

Linda C Sedlak from Chicago, Illinois  

Posted: June 24th, 2014 2:31 PM

All the comments are great but what we need is more physical participation in village meetings when all of these decisions are made. We need to start a Village of North Riverside Residents Party that have meetings say, every other month or so, with voted or appointed representatives, to represent residents at board meetings. We need to fill the gym, not the small theater, with people with their concerns/complaints and really show and prove to this village that WE mean business too. What are we afraid of as residents? They can't sue us because we aren't running against them BUT we are making are concerns noted. So they don't greet us at the door of events with smiles. Who cares? Strength is in numbers. Showing up to board members, being present in numbers at their meetings and forming our own RESIDENT PARTY that will be OMNI present free of charge and not needed to be voted in each election.The time is NOW to have representation of residents at all meetings, physical door to door talks with our residents, whom many don't even get the newspaper to know what's going on but then are hit with the news on their bills. We are a small village and it is possible to take back some say and control as tax paying residents should have. Can't wait for elections to change anything. We saw what happened when change tried to get elected or even get put on the ballot. Force to make the village show their hand and pockets. As a resident born and raised in this town, with parents residing from 1953 until their death, who paid taxes at one time on three homes in town, on a milkmans labor salary and retirement, and I own two homes here now, don't want to see this village monetarily strangle its residents because the bills and funding were not taken care of due to "village politics". We support the Bears, Bulls, Hawks, etc and their big salaries and they could careless about us or NR. It's time to get the NR Residents Team of players together and "PLAY BALL!"

Kent Mazure  

Posted: June 21st, 2014 8:12 AM

Hermanek said it's not fair to residents to cut services and lay off people to make the pension obligations. Is it fair to the residents to constantly raise their fees and to raise the water costs soon? I think for residents it's a damn bit more fair to cut unneeded services and lay off people than it is to suck up more and more money from them and their families. How many of you feel that extra money for your food or whatever you choose to spend it on is more important than funding a pilates class or funding a slick catalogue filled with recreational activities? How much did that cost to produce and send out? The fairness argument to me is baloney. I see it as just the same ole, same ole self-serving in-crowd protectionism with a different set of bad apples from the same rotted barrel as past bad apples. They got it set up so it's hard to take a bite out them, but they sure can take bites out of us. North Riverside is one of five municipalities to receive non-compliance notifications. Out of how many municipalities? What a distinction for the village and what a legacy for the party that's been ruling this village for decades. With blinders on, I think residents got screwed with the mismanagement of the pension accounts during past village administrations and it looks like it's time again for village residents to assume the position.

Rich Gray  

Posted: June 20th, 2014 5:58 PM

Kent, I don't want to sound rude but to say you feel betrayed by the selfish acts of the politicians amazes me. They've been doing this for decades but no one wanted to believe it because they have been handed everything for years. Others have made this point in past 2 elections but no one wanted to believe it was true. It's just now, that people are opening their eyes and seeing the moto has been "all for one, all for me". It's time the residents start asking the hard questions on how their tax dollars have been spent over the past several years.

Kent Mazure  

Posted: June 20th, 2014 9:35 AM

I agree with Sarah's comment below. The party winning the elections really went out of its way to try to keep others off the ballot. I thought the reason for these strong measures was that it really wanted to serve North Riverside residents. I feel served when my local government does all it can to keep my taxes, fees, and other out of pocket expenses low while maintaining a standard level of services. I feel betrayed when it turns out that those that were elected are more concerned with maintaining the status quo that the privileged ones are accustomed to with their perks, huge salaries, and other executive privileges. During the last village election campaigni, salary figures for village department heads and other perks that they received came out. Changing Kennedy's words a little, how about not asking the village residents what they can do for village higher ups, but how about asking what village higher ups can do for the village residents? How about slashing that pay? How about taking on a greater deductibles and co-payments on insurances? How about furlough days, even lay-offs? How about slashing non-essential services? Unthinkable? Why, because that would affect the village higher ups, their families, or their friends? Also, please don't try to fool us again by giving us those out of whack predictions about huge increases in sales tax collections, and then make budgets or plans including sky high pay raises based on those predictions You clamored to get in office. Now show us what you're willing to sacrifice to serve the village residents, and most importantly to help them keep money in their pockets.

Sarah Croslyn from Northbrook  

Posted: June 19th, 2014 8:55 AM

As a former long term resident of North Riverside before my marriage two years ago, I was caught up in the aura of one of the village's mayors who at times seemed larger than life. The inner workings of the administration run by this mayor were opaque to the residents for the most part, and many residents seemed content that the garbage was picked up on time, the snow was plowed thoroughly, water usage charges were kept low, and the fireworks displays were exceptional. Little did they know that pension payments either were not being made or were being made in an insufficient manner. All was honky dory to the average village resident. Fast forward to the present. This mayor was replaced by what seemed to be a less refined version of the former mayor and more like a bull in a china shop in some peoples' eyes. I got the impression that this mayor often mistook his chronic irritation as cosmic insight. This mayor's administration was run in an opaque fashion as well and, with him at the helm, the pension payments were also neglected. Fortunately, a truly insightful moment did occur, and this mayor did not run for another term. Now the village is saddled with a huge pension burden necessitating the possible privatizing of our fire department, significant increases in the costs for water usage, and surely other eventual financial burdens for the residents. I appreciate the greater transparency of this mayor and administration, but I question why the financial burden is increasingly placed on village residents including senior citizens, young couples with children, and others that may be just scraping by. Have the mayor and administration seriously and thoroughly looked inward to cost-cutting measures such as salary and fringe benefit decreases, cuts in programs such as Recreation, consolidation of services with other villages, etc.? Try hard to stop taking money out of the pockets of those that have little if any to spare.

Steven Spiro from North Riverside, Illinois  

Posted: June 18th, 2014 1:26 PM

Suggestions for generating revenues to pay off pension obligations. Install traffic lights at low to moderate volume traffic intersections such as 26th Street and Fifth Avenue and 23rd Street and 8th Avenue. Our village officials could then install red light cameras at those intersections (for primarily safety reasons, of course). It's a no-brainer which would have been commensurate with the thinking capacities of some of our PAST village officials. At village festivities, an area could be set up in which some of our previous village officials would be perched above a pool of water, and people would pay to throw at a target. Hitting the bulls-eye, maybe these officials could keep their heads above water which would certainly be a better position than the one that they left our village in. How much revenue could be brought in this way if, say, Mr. Krochmal was on the perch? Thousands of dollars if unadvertised? Possibly, tens of thousands of dollars if village residents were notified of the event via the financially-questionable practice of mass snail-mailings. The village could make a bulk purchase of portable pumps which could be rented out to village residents when the inevitable torrential downpour is predicted with its potential to cause house flooding. This would be something practical to hand out rather than sneering excuses at village meetings such as, "This was a once-in-hundred-year rain fall" or "Chicago opened up its water holding tanks". Speaking of rentals, our village could purchase portable generators for rental for those occasions on which the power goes out. We in North Riverside know how rare these occurrences are: when a leaf strikes a power line at just the right angle, when a dog randomly urinates at the bottom of an electrical pole, or, most often, when there's not a cloud in the sky and it's a comfortable 75 degrees outside. I have GREAT hope for the future of our village with our NEW mayor, NEW trustees, and seasoned village adm

Chris Kribales from north riverside  

Posted: June 18th, 2014 9:29 AM

Wait a minute, years of not making a full payment, new cars for all heads of departments, and now you need a radical plan? How about stop spending more than we had? Huge fireworks displays in the past were more important than paying bills. I hope this newer board pays bills 1st, then they splurge on over the top items.

Igor Kalinin  

Posted: June 18th, 2014 9:27 AM

This is pretty ridiculous! living here since 05, city stickers went from free to $30, water/garbage changed to 2mo instead of 3.. and magically, the 2mo bill is at or above the previous 3mo bill. village spent a lot of money on commons park, pond, etc.. more and more things for NON residents to enjoy!

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