'Insolvent': City of Harvey is worse than broke, experts say

CHICAGO (FOX 32 News) - The South Suburb of Harvey is at the tipping point.

After examining audit reports obtained exclusively by FOX 32 News, experts say the city is worse than broke.

These are the first independent audits of Harvey's finances in many years. But as FOX 32’s Political Editor Mike Flannery reports from Harvey's City Hall, the auditors complain that key records are missing.

And that's just one of the shocks contained in the 137 pages of Harvey finances. The auditors say Mayor Eric Kellogg's Administration also did not provide documents needed to tell where money was spent or why.

“How can this happen? In the United States of America, in the State of Illinois, how can this type of thing happen?” said Harvey Alderman Christopher Clark.

That was Alderman Clark's reaction when FOX 32 told him what we found in the first independent audit in many years of the monstrous mess that is the City of Harvey's finances.

FOX 32 asked experts at the Civic Federation to analyze the numbers. They called Harvey "insolvent." Even worse, city officials did not give auditors documents showing where money was spent.

“Potentially millions of dollars unaccounted for, that include both the TIF fund, the general fund and other things for which they have no receipts, bank statements or any other back up information,” said Civic Federation President Laurence Msall.

FOX 32: It's shocking.

“It is very shocking and very disappointing,” Msall said.

The administration of Harvey Mayor Eric Kellogg - first elected 13 years ago - simply ignored a state law requiring every local government in Illinois to have an independent audit every year. Only recently did state officials move to enforce that law. Audits for 2011 and 2010 were recently completed by accountants at Lauterbach and Amen.

From what they could piece together, Mayor Kellogg's Administration was spending about 10 percent a year more than it collected, leaving Harvey $59 million in debt in 2011, about $2,500 for each resident.

Experts fear the debt has grown far worse since then, in a town that already has the highest real estate taxes in Cook County and may not be able to pay. All the more because a majority of the City Council last month protested Kellogg's lack of transparency by refusing to approve any real estate tax to be collected in 2016, reducing revenue by more than $13 million.

“If this means that the State of Illinois needs to come in order to correct this or right this ship, then if that's necessary and puts us on better footing as a community, that's what we need to do,” Alderman Clark said.