High-profile lawsuits could ‘completely gut’ Waukegan finances

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Thomas Delany Jr./tdelany@scn1.com Waukegan Mayor Robert Sabonjian speaks as a member of the panel during the Lake County Chamber of Commerce Lake County Mayor's Forum. The forum was held at KeyLime Cove in Gurnee. 5/21/09

Updated: April 10, 2012 11:56AM

One piece of good news when it comes to Waukegan’s financial health is that revenues in 2011 outpaced expenses just enough to start rebuilding a rainy-day fund, which had been depleted into a $1.6 million deficit as recently as April 2010.

“(The) turning around where revenues exceed expenses for the fiscal year ended April 30, 2011, brought (the) rainy-day balance to a positive $2.9 million,” Finance Director Tina Smigielski reported to the City Council on Monday. “This is still a far way off of the targeted $18 million, or 30 percent (of expenses), but is a trend in the right direction.”

But one potential piece of bad news looming in the near future, according to Mayor Robert Sabonjian, is that lawsuits and legal expenses could continue to weigh on the city’s balance sheets — including, he said, a possible lawsuit from Juan Rivera, released from prison last month after serving more than 19 years for the 1992 murder of Holly Staker.

“Our financial position has not really improved,” Sabonjian told the council. “There are a few high-profile lawsuits, from the Rivera case and a few others, that could come back and completely gut us.”

Rivera was freed Jan. 6 after Lake County State’s Attorney Michael Waller announced he would not appeal an Illinois Appellate Court’s decision in December that reversed Rivera’s third conviction. Sabonjian, elaborating Thursday on his comments to the council, said he has no direct knowledge if Rivera intends to sue the Waukegan Police Department or the investigators who questioned him in the Staker murder.

“I don’t think anybody on his legal team has made any comments about a lawsuit. But we’ll be watching the Rivera and (Jerry) Hobbs situations, since they were interrogated here,” Sabonjian said, adding that “there are other (potential lawsuits) that I really can’t be forthcoming about, but there are some problems down the line.”

Sabonjian also mentioned that Waukegan is currently paying “expensive” legal fees to defend former Mayor Richard Hyde and former Police Chief William Biang in an ongoing 1st Amendment lawsuit brought against them in 2004, and there are also grievances and workplace complaints being handled by city attorneys.

During Monday’s report to the council, Smigielski reported the city’s current financial liabilities as including $104.2 million in general obligation debt and nearly $12 million in workers-compensation claims.

“The city is self-funded for general liability and workers-compensation claims,” Smigielski told the council, adding that Waukegan began 2011 with $13.6 million in claims from prior years, then added $1.7 million in new claims while paying out $3.5 million.

“This left the 2011 fiscal year with $11.9 million in unpaid claims at year-end close,” Smigielski said. “While that is still quite a large figure, the city has been making steady improvements in the handling of claims and is starting to reduce this liability over the long term.”

Specifically regarding the city’s general fund, from which operating expenses are drawn, Smigielski reported the surplus of $2.9 million was produced from revenues of $61.7 million and expenditures of $58.7 million. She added that expenses were down some $4 million under projections “due to workforce reductions, holding budgeted vacancies as long as possible, and enhanced fiscal controls over contracts and commodity purchases.”

Sabonjian noted the city’s bond rating recently avoided a downgrade, and added that on the local economic front, downtown activity continues to be boosted by events like the monthly ArtWauks.

“We have some positives occurring in our community,” Sabonjian said. “We are on the right track. Are we where we want to be? No. But we are heading in the right direction.”