At Least Two More Illinois Cities Poised for Bankruptcy

Courtesy of Mish.

On May 29, citing a report mentioned in Bond Buyer, I noted Five Chicago Suburbs Headed for Bankruptcy (More Illinois Cities Will Follow).

The cities are Maywood, Sauk Village, Blue Island, Country Clubs Hills, and Dolton. The village of Dolton strongly disagrees with the report. The others did not comment.

The Bond Buyer report was based on an analysis of state comptroller’s local government Finance Warehouse by Marc Joffe at CivicPartner, a municipal finance research firm.

I have since been in contact with Joffe and asked for an opinion of several cities I believe to be seriously troubled. My top two choices were Harvey and Robbins.

Harvey and Robbins

Joffe responded …

Hello Mish

Your intuition was correct about both. Harvey and Robbins are at least as bad as the five I listed in the original report.

Harvey

The last publicly available audited Financial Report for the City of Harvey covers the year ended April 30, 2009. In that year, the City reported an unrestricted net position of -$17.6 million and a general fund balance of -$10.4 million. The negative fund balance was equivalent to over half the city’s annual revenue.

The city has provided incomplete, unaudited reports for subsequent years. The latest available report, for the year ended April 30, 2013, shows a further deterioration in the general fund balance to -$19.3 million – about 85% of annual revenues. According to the Chicago Tribune (See Harvey Residents Detail Life in ‘Lawless’ Suburb), the city’s 2014 budget also included a deficit, suggesting that Harvey’s fiscal imbalance is even worse today.

Harvey’s late reporting and accumulated general fund deficit led Fitch to downgrade the city from BBB- to B in February 2010 and then to withdraw its ratings entirely in November of that year. The city has now been unrated for more than four years.
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