City of Chicago and City of Harvey Work Out Deal Concerning Late Water Payments

Lee Edwards | As of Friday, January 30, 2015

Mayor of Harvey, Ill., Eric J. Kellogg
Mayor of Harvey, Ill., Eric J. Kellogg

Last week, Chicago Mayor Rahm Emanuel announced that the City of Harvey, Ill. has entered into a settlement agreement with the City of Chicago, to pay $20 million in unpaid water charges. With this action, the City has will be receiving payment from all four outstanding suburban water scofflaws for Chicago taxpayers.

“Chicago taxpayers should not have to spend their hard earned money to subsidize the water used by suburbanites,” said Emanuel. “Taxpayers were owed millions and I have been clear that my administration will not stand by as the residents of Chicago are taken advantage of when suburbs do not pay their bills for the water we all depend on as a region. This settlement amounts to a fairer deal for Chicago taxpayers and ensures that all four municipalities will finally make good on the water payments they owe.”

When Mayor Emanuel took office in 2011, more than $15 million in unpaid water debt had been accrued by four suburban municipalities. Since then, under the Mayor’s direction, the Department of Law and the Department of Water Management have worked to establish payment plans and reach settlements with each municipality to ensure these debts are paid. Once the payment plans are completed and settlements have been paid, more than $30 million will have been recouped for Chicago residents.

“This settlement is the product of lengthy negotiations between the parties, and we believe it fairly balances and carefully addresses the interests of – and has the support of – all parties, including the downstream municipalities that purchase Chicago water from Harvey,” said Stephen Patton, Chicago Corporation Counsel.

“This particular settlement stems from the fact that the City of Chicago has raised its water fees for poor municipalities for an eight year stretch to the tune of 130%. We’ve just come through a recession and a lot of troubling times as a minority community and Mayor [Eric J.] Kellogg refused to carry that increase on to the citizens of Harvey,” said City of Harvey spokesman, Sean Howard, “This payment is very comfortable, we’re a municipality, [and] we have a $30 million budget. We’re comfortable with this payout, it’s very doable.”

Howard continued by stating that eight million dollars in fees and penalties have been waived through the settlement and Harvey has been current with the water bill since August of 2014, having paid $5.5 million. Harvey has also hired a new accountant that is negotiating the remaining payment due and the timeframe.

According to the City of Chicago Department of Water Management, the city increased the rates for water Chicago and suburban customers three years in a row from Nov. 2008 to Nov. 2010 by at least 14% each year. In Nov. 2008, the cost for 1,000 gallons of water was $1.53 by Nov. 2010 the cost for the same amount was $2.01.

Harvey, which sells Chicago water to and collects revenue from five downstream municipalities, stopped making regular water payments to Chicago in November of 2008 according to the City of Chicago. The settlement requires Harvey to pay current Chicago water bills in full and on time and establishes a reasonable payment plan for Harvey to pay the past due principal amount of $18.5 million in monthly installments over seven years with three percent interest. It also requires that Harvey use water-related revenues first to pay for water-related purposes, including making water payments to Chicago, before being used for non-water related purposes.

To ensure that Harvey is complying with this agreement, Chicago will have access to Harvey’s financial system and Harvey will be required to provide accounting reports related to its Water Fund.

If Harvey defaults on its payment obligations and fails to promptly rectify any payment default, the unpaid balance plus three percent interest will become immediately due and owing, and any amounts due will be paid by the bank directly out of the Water Fund Account or General Fund Account. Additionally, downstream municipalities will send their water payments directly to Chicago and the City of Chicago will be entitled to pursue any other remedies it has under law or equity.

Howard told the Chicago Citizen Newspaper that the settlement has not negatively affected the relationship between the City of Harvey and City of Chicago. "Mayor Kellogg has a “cordial” relationship with Mayor Emanuel," Howard said.

For more information about the City of Chicago’s Department of Water Management visit http://www.cityofchicago.org/city/en/depts/water.html. To learn more about the City of Harvey visit http://www.cityofharvey.org/site2/.

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