DIGGING DEEPER: Can Peoria afford to buyback the water system without hitting taxpayers?

 

For weeks Peoria City Council has considered whether or not to buyback the water company and now that consideration will come to a head tomorrow, when council members formally vote on the matter.

The vote is the first of many steps in the lengthy buyback process and it will determine whether of not the city will begin ‘due diligence.’ That term defines the process of evaluating how much the water company is worth.

Peoria and Illinois American Water must both hire experts to determine the company’s value, examine the water company books, etc. The last time Peoria attempted to begin due diligence, it came with a price tag of nearly one million dollars.

This time around, the Peoria CEO council and other investors have raised a combined total of $700,000 to give the city to  help offset the cost of determining how much the water system is worth, but the decision to go all the way with the water buyback all boils down to how much it will cost the city, and if Peoria can afford it- with or without hitting the taxpayers.

Karen Cotton, Spokesperson for Illinois American Water, has been vocal about her opinion on the matter.  “The cost of the water system would be over 300 million dollars and the city of Peoria just can’t afford that.” she maintains.

That number hasn’t been confirmed, though the last time the water company was evaluated it was estimated to be worth $220,000,000.

Joe Connor, a lead attorney for Illinois American Water agrees with Cotton, explaining that this valuation is a waste of time. “It’s not like this hasn’t been performed before.” he stated.

In 1998, the last time Peoria tried to buy the water system, an organization named PAAG – Peoria Area Advancement Group, stepped in to help, loaning Peoria $1,000,000.

But the past didn’t go so well. When PAAG loaned that money to the city, it was under a condition they be repaid out of the purchase of the water company.  However the city decided the $220,000,000  price tag was too much and backed out  of the deal. PAAG then sued the city, claiming they didn’t fully complete the process of due diligence, and won.

“Now we owe them that million dollars plus interest and we’re now at about 2.1 million dollars that we owe them.” outlined Peoria City Manager Patrick Urich.

But that’s not all the River City debt. Urich went down a list of all the money the city owes. The list includes

  • 6 million 2019 budget deficit
  • 150 million in outstanding debt
  • 150 million for the combined sewage
  • 400 million in unfunded pension liabilities.

We’re already at about 750 million dollars in debt or obligations that we’re going to meet in the future.” added Urich.

That number, is the exact reason why Tom Fliege of Peoria’s CEO Council says the buyout is a smart decision.

“We’re gonna raise so many taxes and so many fees that we’re gonna be uncompetitive when it comes time to attract and retain business. We have to look for every possible opportunity other than raising taxes and fees, to generate revenue that this city needs.” Fliege argued.

Fliege’s made multiple presentations to Peoria council members, recommending what he sees as the benefits of local control over water. “If we’re gonna pay such a high price for water, that money should be channeled back into peoria. Not to American waterworks which is the parent company of Illinois American.” he added.

The CEO Council completed a comparative study. In it, the water rates of 15 cities were surveyed. The majority of the cities were local and the results demonstrated all but one of the local cities paid less than Peoria for their monthly water bill.

Cheryl Budzinski of the League of Women Voters of Greater Peoria is another proponent of the water buyout. “We average 55 dollars a month. That rate has changed 70 percent in the last 17 years. It has increased that much.” she exclaimed

She adds, if the water company was owned locally, rates would be evaluated yearly and less likely to fluctuate. But opponents say the exact opposite would occur and fear the trade off is far worse.

Roger Goodson, of Illinois American, the parent company of Illinois American Water explains  “A municipal system (Peoria), they can raise rates with a vote around the horse shoe.” He says several things would go away if the city owns the water, including “real estate taxes. Those would go away not just from the city but the schools because we’re private.”

Matt Bartolo of Laborors Local 165 agrees. Bartolo represents IAW workers along with employees of Peoria Public works. “Really it’s about vulnerability and affordability and it’s always been about that. We’re rolling off of $600,000 worth of reductions by way of furloughs and layoffs in the city of Peoria. Are we gonna lay off another $600,000 or more of workers to do a study to get to a number we know we can’t afford?”

Bartolo says the discussion about the water buyout causes city employees to question the future and stability of their jobs.

If city council does vote to begin due diligence Tuesday and ultimately buy back the water system down the line… there’s a possibility the it would cost the taxpayers.

“It would cost the customers more. If they went through with this they’d have to be paying off the bonds. They’d have to get investments.” says Goodson.

The City Manager confirms that repayment process would take up to 25 years. After that he says owning the water system would generate profit, but again proponents argue never starting the process, means never knowing.

This is something that should’ve been dealt with years ago. We’re not saying buy the water company at any cost. We’re saying investigate. Find out and if it’s a good idea, do that.” says Fliege.

The CEO Council has drafted a new contract for the city, stipulating that the $700,000 they are giving toward due-diligence, will not have to be repaid if they choose ultimately, not to buy the water company. However if they do, that dollar amount turns into a loan that would need to be repaid.

The contract also outlines that Peoria cannot be sued if at the end of due-diligence, they decide not to buyback the water.

Again, Peoria City Council plans to vote on this Tuesday during their regular city council meeting.

 

lmelendez

lmelendez

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