One of a number of Illinois towns struggling with increasing pension costs wants to save money by shifting control of its fire department to a private company -- a rare move village officials argue is the only option because they can't make any more cuts or raise taxes.
The village of North Riverside pitched the cost-saving proposal before state regulators Thursday at a Chicago hearing after being summoned for repeatedly shirking payments into its firefighter and police retirement funds. Mayor Hubert Hermanek estimates the village could save $700,000 annually by privatizing its fire department -- a solution that some say could be tried more and more in coming years.
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"It just keeps getting harder and harder to make these contributions, and it's not fair for the residents to cut services and lay off people, which would cut down the services and their safety," Hermanek said.
In 2016, state law requires cities to make required contribution increases so they'll reach 90 percent funding by 2040. If cities don't, the state will begin doing it for them by diverting grant money now used elsewhere directly into pension funds. Many cities have pushed off payments, and the Department of Insurance is meeting with some of the worst offenders to create a funding plan. However, the department can't approve a privatization plan.
"Considering the onerous labor mandates that have been approved by the state and imposed on local government, along with the heavy financial burden created by the pension obligations, I wouldn't be surprised to see more communities exploring alternative service delivery options," Joe McCoy, legislative director for the Illinois Municipal League, said.
Under North Riverside's proposal, the fire department would be folded into the village's contract with Paramedic Services of Illinois, the company that provides its ambulance service. Hermanek said all 16 current firefighters would be offered employment under the five-year contract with the company.
Privatized municipal fire departments are somewhat rare in Illinois. Lincolnwood, a village in Cook County, hired a private company to operate its fire department in 1990 after ending a contract with the city of Chicago.
But firefighter union officials say privatized fire departments provide lower service levels to residents because companies are more interesting in turning a profit. Pat Devaney, president of Associated Fire Fighters of Illinois, says North Riverside officials should be held accountable.
"Anybody who has done even just a small amount of research into the way the politicians in North Riverside have managed their finances would be outraged." Devaney said. "Here's the plan -- let's blame the firefighters for it. It's disgusting."
Records obtained by The Associated Press show North Riverside officials didn't put any money into its firefighter or police pension funds in multiple recent years. Overall, it's come up more than $5 million short between 2008 and 2012. But village officials contend the shortfall can be attributed to a loss in sales tax revenue from the North Riverside Park Mall during the economic downturn and an inability to raise property taxes.
Still, village officials have hailed their plan as a "bold and innovative" way to solve a problem facing many Illinois towns.
"The good news is that we have an excellent solution, one that allows us to keep the strongest emergency and fire protection services in place and avoid layoffs without having to sacrifice other village services," North Riverside village attorney Burt Odelson said in a statement.