Harvey Fire Department news

Even though it’s ultimately up to the elected officials of Harvey to determine how much property tax to impose on residents, a state appeals court has ruled that the city's firefighter pension fund is dangerously close to defaulting. This means the pension board has a legitimate claim under state law to compel the city to pay nearly $11 million in unpaid and underfunded contributions to the pension fund.

On August 4th, a panel of three judges from the Illinois First District Appellate Court in Chicago concluded that the city's mayor and city council had consistently misused their discretionary powers under state law to fund the firefighter pension fund. As a result, the fund is now on the verge of bankruptcy.

The appellate judges emphasized that previous Illinois court rulings, which typically prevented courts from mandating specific funding amounts for public employee pensions, didn't apply to Harvey's situation. Consequently, the judge presiding over the case in Cook County was justified in ordering the city to cover the underfunded amount, regardless of the city’s claim that it simply couldn’t afford to do so.

"Based on the testimony provided by several witnesses, Harvey has shown a flagrant disregard for the Pension Fund over an extended period, leading to the fund's dwindling assets," the justices wrote. "This situation creates a valid and enforceable constitutional right to secure funding for the pension."

The lawsuit was initially filed in 2010 by the Board of Trustees of the City of Harvey Firefighters' Pension Fund against the city, alleging persistent underfunding had left the pension fund perilously close to insolvency. According to court records, actuaries estimated that the city had withheld approximately $8 million in actual contributions and another $2 million in potential investment earnings due to its failure to make proper contributions between 2005 and 2013. By 2013, this had reduced the pension fund's assets to just around $11 million—a significant $23 million shortfall from what actuaries deemed necessary.

In her special concurring opinion back in 2014, Judge Lampkin noted that the pension fund disbursed roughly $157,000 monthly to beneficiaries, whereas the city's 47 active firefighters contributed only $25,000 per month. She pointed out that these active firefighter contributions were being used to pay current beneficiaries instead of being invested for future pension benefits.

“This is more than just an underfunded pension plan,” Lampkin wrote. “The severe deficit and rapid depletion of assets, combined with Harvey’s documented inability to collect sufficient taxes to meet its obligations, indicate that the Pension Fund will soon be unable to pay beneficiaries or honor its commitments.”

Following years of litigation in the trial court, former Cook County Circuit Judge Mary Mikva, who now serves as a justice on the state’s First District Appellate Court, ruled that the city's failure to pay violated the Illinois Pension Code. She ordered the city to compensate the pension fund nearly $11 million in damages. However, she refrained from mandating the city to increase taxes, leaving that decision to the local government.

Harvey appealed the ruling, arguing that Judge Mikva had erred, as Illinois courts had long upheld the state constitution and Pension Code, which stipulate that cities and other governmental entities must honor their employees' pensions without granting pension funds the authority to demand specific funding levels. The city also contended that the court order infringed on the principle of separation of powers, essentially forcing the city to either allocate tax revenue as dictated by the court or raise taxes.

The appellate judges disagreed, stating that Harvey does not have unrestricted discretion over how much it contributes to its pension funds. The Illinois Pension Code mandates that municipalities annually allocate sufficient funds to meet their pension obligations.

“While Harvey retains the authority to set its tax rates, it cannot abuse its discretionary powers under the Code,” the justices wrote. “The Code explicitly states that municipalities must annually levy a tax that generates sufficient revenue to meet the annual actuarial requirements of the pension fund. Harvey has neglected to enact such a levy, thus abusing its discretion. Therefore, this court supports the trial court's decision that the separation of powers doctrine does not prevent the Pension Board's claim.”

The justices dismissed Harvey's argument that it couldn't afford to make the required actuarial payments due to insufficient tax revenue. Instead, they stated that the city chose to prioritize other expenditures over the pension fund, effectively diverting funds meant for pensions to other obligations. In essence, the justices clarified that under state law, the city cannot selectively shortchange pension funds; any reduction in payments must apply equally across all categories.

Moreover, the justices criticized the city's poor financial management practices over the years, referencing various scandals and court orders targeting Harvey and its officials. These included instances where funds earmarked for hotel development were diverted to cover general city expenses like payroll, as well as the controversial $80,000 unregulated expense accounts given to aldermen. Additionally, the city reportedly paid large sums to relatives of influential officials for mundane tasks such as creating a social media site or shoveling snow.

“Harvey has offered no evidence demonstrating its capacity to manage finances responsibly and adequately fund the Pension Fund,” the justices wrote.

Like Judge Mikva, the justices also declined to issue a court order specifying how the city should finance its pension obligations, emphasizing that decisions regarding taxation remain within the purview of the mayor and city council.

“Tax levies imposed by Harvey are collected at less than 100%, meaning some degree of discretion is necessary to project the required revenue. As long as Harvey exercises its discretion to levy a tax rate sufficient to meet the actuarially mandated contribution, it fulfills its obligations under the Pension Code,” the justices explained. “Harvey retains the authority to finalize the process by enacting an ordinance to implement the tax.”

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