Why all the hype? What’s all the noise about leasing O’Fallon’s water and sewer utilities? Is there a problem with O’Fallon’s fiscal policies and practice? Maybe the financial problems stem from the city accumulating debt of $41,641,202, allowing them to only borrow another $13,277,289 before reaching their legal debt limit.
Does leasing our water and sewer utilities address the real cause of financial shortfalls being experienced by O’Fallon? No. It merely allows the city to continue spending at or above its current levels without tackling the real issue of how the city got to this point in the first place.
Does a lease save any money? No. The city pays nothing out of its general fund revenue sources to operate and maintain the water and sewer utilities. All utility costs are paid by water and sewer customers through monthly billings. Our utilities have performed so well over the last few years that more than $8 million has accumulated in their reserves. Why turn that money and any future revenues over to a for-profit company who will put it into the hands of shareholders? That money needs to stay in O’Fallon.
A lease could actually increase costs to residents. A July 2014 analysis by the city estimated if the utilities were privatized, between $1.3 million and $1.7 million in expenses would have to be absorbed by other funds or come from other sources every year to make up for the loss in revenue currently provided to the general fund by the water and sewer utilities.
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The city’s Strategic Plan, a costly, unprioritized list of projects, far exceeds the possible $50 million lease payment. Leveraging the equity in our water and sewer utilities to come up with “quick money” to help pay for this wish list only hides the bigger problem. Once this “quick money” is spent, the city will want and need more. The money from a 40-year lease is a Band-aid solution to the bigger problem of city spending that has gone unchecked.
What the city has avoided answering is why critical needs have not been funded as part of the normal budgeting process. Instead, funding for amenities has been the priority. Well over half the city’s debt can be directly attributed to costs associated with the Sports Complex and Convention Center.
The real issue is the need for O’Fallon to implement budgeting practices and make spending decisions based on the city’s current revenue stream without raising new fees and taxes or leasing our resources.
It may take the city three to five years to spend $50 million and the budget may look fine. However, what happens over the next 35 years of the lease? Signing a lease today only provides immediate benefits while deferring the costs (higher user fees and dried up revenue streams) to the leaders and citizens of later generations.
There is another underlying problem with a lease. A lease does not require any regulatory oversight by the Illinois Commerce Commission. That means every disagreement about water or sewer rate or fee increases requested by the leasing company will be fought in court where the team with the best lawyers usually wins. This means additional costs for the city and its residents in the long run.
Protecting the public interest is not a priority of for-profit companies. Fairview Heights got it right in a resolution opposing the privatization of O’Fallon's water system. It states, in part, “Public utilities have the unique responsibility to be protectors of public health and the environment, while serving as partners in the community's growth and development. Residents are best served by an open, publicly accountable water supply system.”
Is it coincidence that lease proposals are due March 30? Don’t be surprised or misled if a city press release announces some eye-popping lease payment figures a week before the election. Don’t let the dollar signs flashing before your eyes distract you from the real issue.
On April 7, vote “no” twice. The first “no” vote will send a message to City Hall to face fiscal reality, realign its budget priorities and learn to live within its means. The second “no” vote will let City Hall know that our city is not for sale or lease.
Kristi Vetri , mayor of O’Fallon from 1985-1993, is chairman of the O’Fallon Citizens for Action committee and a private practice elder law attorney.