Chicago Suburb, Strapped With Pension Debt, Considers Privatizing Pension System

Illinois flagThe Chicago suburb of North Riverside is straddled with pension debt, and it’s not about to get better – since the town hasn’t made its required pension payments, the state will likely withhold sales tax revenue from the suburb starting in 2016.

That’s why North Riverside is considering privatizing its fire department – a move that would rid the city of future pension costs.

From the Chicago Sun-Times:

North Riverside says its contract with firefighters expired in April and it seeks to privatize its fire protection services, turning current firefighters into employees of a private company, PSI, which has provided paramedic services to the village for decades.

Current North Riverside firefighters would work for PSI at their current salaries and with their current health insurance plan. They also would keep already-accrued pension benefits but would be folded into a 401-(k) program at PSI that would include an employer-matching contribution. Odelson says privatizing fire services will save the village in insurance, overtime, sick time and pension costs for firefighters who make more than $200,000 in yearly salary and benefits.


The state will begin garnishing sales tax revenue from North Riverside in 2016 if it doesn’t catch up on pension debt. The state can withhold all of that revenue in 2018, says Burt Odelson, North Riverside’s attorney. “When that happens,” he said, “North Riverside will no longer be able to pay their bills.”

North Riverside is a bedroom community without the home-rule power to raise taxes without voter approval. Most of its revenue is generated by sales taxes from the North Riverside Mall, but the village skipped pension payments for three years when the recession hit and tax revenue dropped.

The village now faces an operating budget deficit of $1.9 million, with $1.8 million due to pension obligations. The required payments to the firefighters’ pension fund have skyrocketed sevenfold in the last 10 years.

Unions say the idea would be a breach of contract:

J. Dale Berry, lawyer for North Riverside Professional Firefighters Local 2714 and counsel to the Associated Firefighters of Illinois, says North Riverside is obligated to keep the contract’s current provisions while it proceeds through arbitration, which he says the village is trying to circumvent. The contract, he notes, has a clause forbidding the kind of subcontracting privatization the village seeks.

“They presented this as a fait accompli,” Berry says, noting officials rejected union offers for cheaper health plans, cost cuts and an offer to help organize a consolidation with other departments. “This privatizing thing is another way to open the door to patronage, nepotism, non-merit hiring,” Berry said.

The North Riverside Firefighters Union Local 2714 has said it will sue if the fire department is privatized.

More coverage of the town’s pension funding crisis can be read here.

Chicago Suburb To Scrap Fire Department Due To Pension Costs


The town of North Riverside, a small suburb west of Chicago, is moving to terminate its contract with all village firefighters and hire new firefighters from a private service. The village claims it is facing a $2 million budget deficit and it cannot handle the costs of the salaries and benefits of the firefighters.

From A North Riverside press release:

Mayor Hubert Hermanek, Jr. of west suburban North Riverside, after yesterday announcing an impasse after six “good faith” negotiating sessions with Firefighters Union Local 2714, instructed the village’s attorneys to file suit today in Cook County Circuit Court asking that court to affirm North Riverside’s right to legally terminate the firefighters’ contract, which expired on April 30, 2014.

North Riverside, with a population of 6,672 in 2,827 households, derives most of its revenue from sales tax, thanks in large part to North Riverside Park Mall. However, the village is facing a proposed fiscal year 2014-2015 operating budget deficit of $1.9 million, with $1.8 million of this deficit being a direct result of the Village’s growing annual public pension obligation. All of this and more is evidence that supports the Village’s inability to sustain salary and benefits of over $200,000 per fireman and $230,000 per Lt. anymore.

Contracting firefighter services from Paramedic Services of Illinois (PSI), which has provided paramedic services to North Riverside for the past 28 years, would save the village more than $700,000 annually and vastly reduce the adverse impact of future pension obligations imposed by the state. All PSI paramedics are certified as firefighters, as well.

According to Hermanek, the village presented multiple compromise proposals to the union, including a progressive privatization plan based on an 11-year contract, during which 10 of North Riverside’s 14 current firefighters would reach retirement age and 25+ years of service. As they retired or normal attrition occurred, firefighters would be replaced with firefighters/paramedics from PSI. As a result, by the end of the 11-year contract, village fire and emergency protection services would be almost fully privatized, maintaining safe and reliable service, while achieving cost-savings necessary if North Riverside is to remain solvent.

As noted in the above paragraph, the village had previously tried to strike a deal with the firefighters’ union where the village would phase out the old firefighters and slowly phase in the private force.

The union (Firefighters Union Local 2714) then brought three of its own proposals to the table. Ultimately, however, the village and the union couldn’t agree on any deal.