Blue Island Mayor Domingo Vargas / Credit: Brett Roseman, Sun-Times Media 

The green has been flowing in Blue Island under new Mayor Domingo Vargas.

Ever since taking office in May amid a pledge of reform and stabilizing government finances, Vargas and his political allies have steered municipal jobs and no-bid contracts to campaign supporters and other insiders – some with ties to Illinois House Speaker Michael Madigan (D-Chicago) and other state lawmakers, the Better Government Association has found.

Vargas says the decisions were based on merit, not clout or political gain, as he works to improve the city’s gloomy financial picture. What’s more, he says he doesn’t mind if his choices come under fire.

“I’m not here to win a popularity contest,” says Vargas, formerly a Blue Island alderman. “I’m here to bring change to this town.”

Among the “changes” the BGA has found, Vargas and city officials:

  • Named John Rita Jr. director of public safety, a newly created post that pays $90,000 a year and oversees the police and fire departments. Rita, a former official with the Cook County sheriff’s office, donated $1,000 last March to a Vargas-linked political committee. Rita and his brother, state Rep. Robert Rita (D-Blue Island), worked as unpaid advisors on Vargas’ mayoral campaign.
  • Hired Mesirow Financial to procure new health insurance coverage for its employees. The Chicago firm employs Madigan’s son, Andrew Madigan, who was involved in securing the business from Blue Island. The Mesirow deal was not competitively bid. Robert Rita and the elder Madigan are political allies.
  • Hired Vargas campaign volunteer Don Marchbanks as director of the Blue Island Emergency Management Agency, which handles traffic and crowd control at public events. Until Vargas took office it was an unpaid position; Marchbanks was given a $12,000-a-year salary.
  • Awarded a no-bid contract to a Chicago law firm that employs a legislative colleague of Robert Rita, state Rep. Chris Welch (D-Westchester). Welch’s wife, ShawnTe Raines, also is an attorney at the firm, and she was named Blue Island’s city attorney after Vargas won office.

Vargas, City Clerk Randy Heuser and eight other candidates formed a political slate, called the Blue Island Independent Party, that ran in last April’s election with the backing of the Rita brothers. All but one prevailed.

Vargas says the candidates inherited a prickly financial situation. The city, already saddled with unfunded pension liabilities of $40.3 million, has seen annual expenses soar 22 percent to $26.3 million since 2010. Meanwhile, revenues have remained relatively flat, putting pressure on city officials to cut costs. Saving money was the reason the city recently picked a new health insurance plan for 183 current and former municipal employees and their families, Heuser says.

But the BGA found the new deal, which took effect Oct. 1, may not deliver immediate savings. Blue Island had been self-insured, and last fiscal year its health care costs totaled $2.1 million, or $200,000 less than what the city will pay under the new deal.

Heuser called that an anomaly and says, “We happened to have a good claim year. But who wants to gamble?” In 2011 and 2012 the city’s health care costs totaled $2.9 million and $2.7 million respectively, he says.

The new contract is with health insurance giant BlueCross BlueShield of Illinois. Mesirow was Blue Island’s broker, essentially acting as a middleman between the city and the insurer. Mesirow’s commission is $39,000, Heuser says.

On Aug. 29, the city council approved the contract with BlueCross BlueShield.

The vote culminated a process that began shortly after the election when city officials, at Heuser’s suggestion, privately decided to switch insurance.

The city could have gone through a competitive bidding process to hire a broker. But instead, Heuser this summer contacted Mesirow’s Andrew Madigan, the son of the powerful Illinois House speaker.

The scenario follows a pattern of Chicago-area towns with direct or indirect ties to the elder Madigan doing business with his son and Mesirow.

In this case, Michael Madigan and Robert Rita are political allies and Robert Rita has strong ties to Blue Island. Political committees controlled by Michael Madigan have donated more than $73,000 to Robert Rita’s campaign funds since 2004, according to the Illinois State Board of Elections.

Andrew Madigan didn’t return calls. A spokesman for Speaker Madigan had no comment.

Robert Rita says he knows Andrew Madigan and even told city officials “Mesirow is a good company.” But he denies having lobbied Blue Island to use the firm.

“I care about this town,” Robert Rita says. “I want to make sure it’s going in the right direction.” But, “I have no involvement in the day-to-day operations.”

This story was written and reported by the Better Government Association’s Andrew Schroedter, who can be reached at (312) 821-9035 or aschroedter@bettergov.org.