CAIRO — Cairo Councilman Danny Brown said he’s concerned that there’s another brewing crisis in Cairo that isn’t getting enough attention — this one at City Hall.
At every council meeting for several months running, Brown, the city’s police commissioner, said council members are told, “We almost didn’t make payroll this month. We might not make it next month.”
As negotiations between the city and police union have been ongoing for more than two years, Brown said the Cairo Police Department is experiencing rapid turnover in the face of uncertainty. Officers are being told to be prepared for cuts to their health insurance, no raises and potentially other changes aimed at cutting costs given the city’s financial situation.
“Look at all the politicians coming down here for the housing situation, which I agree with 1,000 percent,” Brown said during an interview in his home this past week. “But how many have you heard talking about the city situation?”
“If you don’t have a city how does housing work?”
Brown was referring to efforts of city leaders to secure a private developer to help increase the affordable housing stock. The mayor and others have said they aim to secure a public-private partnership for new housing that allows many of the 400 people — about 185 families — being relocated from Elmwood and McBride public housing complexes to remain in Cairo.
Brown said he wants to see that happen but is concerned that without the means to meet other obligations, city police and fire services may not be available in a matter of months.
Mayor Tyrone Coleman declined the newspaper's request for an interview concerning the city’s finances. Based on observations and conversations with those close to the situation, Coleman and other city officials are trying to get the city’s finances back on solid footing.
But Brown said the majority of council members are not kept abreast of what’s going on. He said all he knows to go on is the repeated warning from a city official that insolvency is right around the corner.
City’s finances in the spotlight
Others also have been sounding the alarm on the city’s financial issues.
In April, Cairo Public Utility Co. officials addressed the situation with U.S. Rep. Mike Bost and the Illinois Municipal Electric Agency (IMEA), the utility’s wholesale electric provider. The meeting was called after Bost received numerous complaints about high utility bills in Cairo, according to Todd Ely, the utility’s Springfield-based consultant.
Ely said Cairo Public Utility is not the problem, but rather says the issue is with IMEA. He said the municipal electric agency is charging its 33 members — 31 cities, an electric cooperative and the nonprofit Cairo Public Utility — electric rates that are 125 percent above fair market value, a claim IMEA says is misleading.
Ely said IMEA should extend special consideration to Cairo because it is on the brink of insolvency and may default on its obligations, which ultimately could result in the utility company defaulting on its agreement with IMEA. This is uncharted territory, he said.
“Time to act is now as the city will become insolvent later this year. Not theoretical — guaranteed,” concluded a PowerPoint presentation the local utility shared that day with Bost.
Ely said he has not personally reviewed the city’s finances. He said that information was relayed to him by Coleman and City Treasurer Preston Ewing.
“That was their words, that they are insolvent,” he said. Ely said city officials relayed to utility company officials that they are exploring all their options while also working to stave off insolvency, which is the inability to pay bills as they come due. If the utility company is successful in reducing its wholesale electricity costs, Ely said utility managers are committed to reducing rates for customers and helping the city out of its financial bind.
Ely provided the newspaper a 2014 report by The Institute for Illinois’ Fiscal Sustainability at the Civic Federation discussing options for financially struggling cities in Illinois.
Options limited for distressed cities in Illinois
The report, which Ely said a city official shared with the utility company, states that cities in Illinois cannot directly file for bankruptcy but notes there are laws on the books intended to assist distressed cities.
In 1990, then-Gov. James Thompson signed the Financially Distressed City Law and the Local Government Financial Planning and Supervision Act. Only East St. Louis has exercised options under either law, according to Ely. Under the latter act, a local government in a city with fewer than 25,000 people facing a fiscal emergency can pass an ordinance petitioning the governor to name an 11-member commission to develop a detailed financial plan for the city.
Because Coleman declined an interview on the subject, the newspaper is unable to determine at this time whether the city is looking toward this option.
In response to a Freedom of Information Act request, the city provided the newspaper with what Cairo refers to as appropriations ordinances for the fiscal years 2016 and 2017, the latter which concluded on April 30. As well, the newspaper provided financial audits for 2015 and 2016, and all union contracts in effect for municipal employees.
Cairo’s pension funds in ‘dire strait’
In a cursory review, it appears one of the most serious and immediate issues facing Cairo is its woefully underfunded police and fire pension funds.
According to Dennis Orsey, who is the attorney for the Cairo Firefighters Pension Board and Cairo Police Pension Board, the funded ratios, as of May 1, 2016, are 11 percent for the fire pension fund and 22 percent for the police pension fund.
Bob Sector, director of investigations for the Better Government Association, a watchdog organization focused on Illinois government with expertise in government pensions, said that those figures are alarming.
“There are hundreds of municipal police and fire pension funds across Illinois and the bulk of them are seriously underfunded,” Sector said. “But even though the bar is already low, the funding levels for the funds in Cairo appear in particularly dire strait."
Orsey, who represents numerous downstate police and fire pension boards in southern and central Illinois, said that downstate pension funds are funded on average at about 58 percent and that the vast majority have improved their financial sustainability in recent years. Cairo's funds are moving in the opposite direction for a variety of reasons, including that there are fewer active employees paying in than retirees taking money out, he said.
State law says all downstate funds are required to be 90 percent funded by the year 2040. The law calls for state payments provided to cities with woefully underfunded police and fire pension funds to be redirected toward bringing them up to a more sustainable level, but Orsey said the Illinois Comptroller's Office has yet to promulgate the rules on how that will work.
Orsey said Cairo's fire pension fund is projected to run out of money in 19 months. “We have generated a letter to all beneficiaries earlier this month putting them on notice of that determination,” Orsey said. The police pension fund has about 10 years’ worth of funding, he said.
“If we tried to draw analogies, the fire pension fund is the one in intensive care bleeding out and unless we get a quick transfusion of cash — likened to a blood infusion — this patient is going to die in 19 months,” he said. “The police pension fund is in the emergency room at the hospital and they’re in triage to determine what can we do to save this patient but we’re not yet in intensive care. They’re both serious.”
As of May 1, 2016, the most current records, Orsey said eight members are drawing a retirement from the Cairo police pension fund. Four are drawing disability benefits. Four surviving spouses are drawing a benefit and one person is a deferred annuitant — which means the individual is eligible to draw based on years of service but has not yet reached the minimum age to do so.
On the fire pension side, six people are drawing a benefit, one person is drawing disability pay, and three surviving spouses are drawing benefits, Orsey said.
Ely: Efforts to secure a state bailout failed
A review of audited financials and labor contracts also indicate that part of the city's financial difficulties are because of benefits that appear to be unsustainable for a city the size of Cairo. City employees are represented by the Laborers Local 773.
Brown said police officers have opted to switch their representative for collective bargaining to the Fraternal Order of Police, but officers are still working under an expired Local 773 contract as negotiations have stretched on for several years now without a final deal.
Ely, the utility’s consultant, said that on behalf of the city, he attempted to secure a $700,000 state bailout for Cairo during budget negotiations in Springfield, but that didn’t come through. Ely said Ewing, the city treasurer, told him that would be enough to stave off insolvency for at least a year. Ely said city officials relayed that in that time period, they would make more difficult decisions to downsize the city's operations and also hoped to grow the tax base by bringing in new businesses and developments.
Ely said he also unsuccessfully sought $1 million to assist Cairo Public Utility in building an inland port operation.
Governor: 'There's no good solution'
Gov. Bruce Rauner, speaking to The Southern Illinoisan's editorial board this week, said that when it comes to Cairo "there's no good solution, and it's so frustrating." Rauner has not visited Cairo in the wake of the housing crisis, but said he and his staff have had conversations with the mayor and others and that officials from the Illinois Housing Development Authority have been to Cairo in recent months to assess the situation.
"I don't know why the Obama administration — I'm not going to point fingers," Rauner said. "It's a federal issue. It's not a state issue. And, you know, I don't have a lot of options that I can do other than push. I'm not sure why the Obama administrator or Senator Durbin — this has been an issue for a while, they haven't done anything, I don't know.
"But I'm still talking to people, our team is talking to the mayor. I like the mayor. He's, you know, at wit's end. It's a hard situation."
The governor also touted aspects of his Turnaround Agenda, saying Cairo, like the rest of the state, could see new economic life if the General Assembly would sign off on his pro-business reforms.
Though he offered no concrete solutions for the short-term, Rauner said he's convinced Cairo can make a comeback. "It's like Detroit," he said. "Detroit is doing a renaissance right now."
Brown: It's reaching a critical point
Brown, the city police commissioner, said he’s held his tongue for nearly a year about the city’s worsening financial predicament but sees it quickly heading toward a critical point.
“There might come a time when somebody’s breaking into your home and … I don’t have anybody to send to you,” Brown said that is the message he wants citizens to understand.
If Cairo does not have a police force, the Alexander County Sheriff's Office or Illinois State Police would have to step in. Brown said the county is already stretched way too thin.
Five officers have left the Cairo Police Department in the past six months, four of them since May, he said. Brown said the officers left for a variety of reasons, but that the city’s financial issues make it hard to recruit and retain qualified officers. A year ago, the city had 12 officers, he said. Now they are working with five, and three of them are not certified meaning they have to log hours with a more experienced officer and attend training academy away from Cairo that the city pays for, Brown said.
Without enough manpower, he said the overtime is costly for the city, and he worries about burnout among the skeleton crew. “What fears me the most is that a fatigued officer is a no-good officer. If you are tired you cannot function well,” Brown said. Police Chief Arnold Burris seconded that concern. “You’re not alert” if working too many hours, he said.
'Pray and hang on'
Ely said he also is of the understanding that Cairo's financial predicament is growing more serious by the day.
“The status quo must change or the city will fail. It will no longer exist over a period of time,” Ely said. That's why the utility is advocating for a port and rate relief from their wholesale electric supplier, he said.
Brown said he believes that Cairo will turn a corner in the long run, but said that it’s time for city officials to get real about the situation.
“Without population, without revenue, the city is not going to be able to survive. We’re going to have to disband the city — the city council, the mayor, everything,” Brown said.
Asked what options he believes the city has in the current moment, Brown said, “Just try to pray and hang on."
— Reporter Janis Esch contributed to this report.