A state appeals court has, for now, ordered Illinois’ state comptroller to release its hold on more than $1 million in Illinois tax disbursements the financially troubled city of Harvey says it needs to meet its payroll, including paychecks for its police and firefighters, but which the state says it is required to seize and steer to retired Harvey municipal workers.
In a brief order issued during the evening hours of April 16, a three-justice panel of the Illinois First District Appellate Court placed a temporary restraining order on Illinois Comptroller Susana Mendoza, barring her from withholding $1.07 million she had embargoed under a state law she says requires her office to pay to pension funds for retired municipal workers whose government employers have not allocated enough of their local tax money to workers’ retirement benefits.
The appeals panel sent the matter back to Cook County Circuit Court for further proceedings and a hearing on a preliminary injunction sought by the city of Harvey.
Illinois Comptroller Susana Mendoza | Coutesy of susanamendoza.com
The appeals court did not offer an explanation or reasoning for its decision to apply the restraining order.
A spokesman for Mendoza’s office said the comptroller’s office has no intent to contest or appeal the temporary restraining order, and will abide by court orders issued in the case.
“The dispute is between the city of Harvey and its pension funds,” said Mendoza spokesman Abdon Pallasch. “The comptroller’s office is a passive player in this. As soon as the lower court issues an order, we will comply with it.”
The matter landed in court April 5, when the city in south suburban Cook County sued the comptroller’s office to demand release of the money Mendoza had embargoed, purportedly at the request of the city’s police pension board.
According to the complaint, Harvey said it is operating at a deficit of nearly $6 million and needs the money to satisfy its payroll and employee health insurance obligations. However, the city said, its property “tax collection rate is at an all-time low, approximately 58 percent,” while an “independent audit demonstrates a governmental operational deficit of $5,968,647,” leaving less than $200,000 in the general fund.
The city said Mendoza “intercepted and is currently withholding monthly revenues due to the city … under the request of the Harvey Police Pension Fund.” While the Illinois Pension Code authorizes the comptroller to embargo such funds at the request of a pension fund, Harvey maintains such actions can only take place if the municipality is delinquent, and Harvey maintains it is compliant with its obligations.
“Unless this unlawful withholding ceases,” the city said it “will face catastrophic issues regarding safety, security and maintenance of adequate services to the city’s senior population, four school districts, Ingalls/University of Chicago Hospital and over 120 businesses.”
According to the complaint, police pension fund trustees entered a debt of $7.3 million on April 3, 2015, but the city says it already protested to Mendoza that those withholdings are not owed to the board because it’s already pledged revenues to bondholders with greater rights, has levied “the required actuarial amounts of $1.2 million and has appropriated future levies for the pension fund” and public policy forbids garnished public money against a municipality for essential government services.”
The city said it levied $1.23 million for the pension fund in the current fiscal year and the Cook County Treasurer’s Office transmits the money directly. Since February, according to the complaint, the pension fund has gotten $300,981 in distributions.
Harvey detailed remittance notices Mendoza sent to the city in February and March for revenue funds like city sales, excise, income, personal property replacement and local use taxes, as well as transportation and motor fuel, all adding up to the currently withheld amount. The city sent protest letters to Mendoza regarding each notice, and on March 29 Mayor Eric J. Kellogg sent a letter “indicating the city’s imminent catastrophic issues” if the money isn’t released.
The city wants the court to declare it in compliance with the pension code and to declare the withheld money its property and formally ensure its release.
The city requested both a temporary restraining order and a preliminary injunction.
However, on April 9, Cook County Circuit Judge Raymond Mitchell denied that request, giving the comptroller’s office authority to continue withholding the money for payment to the police pension fund, as required by state law.
Harvey, through its attorneys with the firm of Roth Fioretti LLC, of Chicago, appealed the decision, and the appeals court quickly weighed in with the order approving the TRO.
However, in the meantime, the city moved to lay off 30 police officers and firefighters.
It was not clear if or when the money would be release, or what the city of Harvey might do once it receives the funds.
An analysis completed by Local Government Information Services and published in South Cook News shows Harvey’s firefighter retirees, many of whom have relocated to lower tax states, including Florida, Arizona, South Carolina, Nevada and Indiana, have collected millions of dollars more in benefits than they paid into the retirement system.
The report indicates taxpayers in Harvey, which is losing population, have paid out nearly $25 million in pension benefits to 42 retired firefighters, while those retirees paid in only about $1.14 million to the retirement fund. Further, the report indicated 24 of the Harvey firefighter retirees contributed zero to their pension fund, receiving $17.4 million in benefits.
Retirees drawing pension checks from the cash-strapped city include Charles W. Jackson, who also draws a salary of $110,830 as fire chief in neighboring Hazel Crest, Joe W. Ellington, who serves as fire chief in Country Club Hills.