O'Fallon Progress

Mayor’s Column: Positives of entering into a management lease

Over the past few months, there has been a great deal of misinformation shared regarding the topic of the city examining the possibility of leasing the city’s water and wastewater systems.

Many of O’Fallon’s residents have been told by members of the Citizens Against Water/Sewer Sale Group that the city’s water and wastewater operations are extremely profitable and that the city uses these funds to subsidize city-wide operations and improvements. These statements are misleading and false. O’Fallon’s water and wastewater systems, in their current form, are not a large source of annual revenue for the city.

Over the 18 years I have been Mayor (1997-2014), when factoring in operating expenses, capital improvement costs and debt payments, the water and wastewater utilities’ net cash decreased (lost) over $800,000. If in some years, the water and wastewater utilities did generate a positive cash balance, the city could only use the funds to subsidize expenses directly related to water and wastewater.

The city cannot use water and wastewater funds to pay for most city expenses, like streets, parks, and police. For example, this year, funds from water and wastewater will pay for a portion of the replacement of the heating, ventilation, and air conditioning (HVAC) at city hall. Because city hall houses employees from water and wastewater, this is an expense that is directly related to the water and wastewater operations. The city’s general fund, which draws a large portion of its revenue from sales tax, will pay for the other share of the HVAC replacement.

The city council has never believed that a profit should be made through the rates our residents pay for water and wastewater services. This type of revenue generation would be nothing more than another tax on our residents, something the city council has always been against.

If we entered into a management lease, we would be able to generate a significant amount of revenue, without having to increase taxes or the amount our residents pay in their monthly bills for water and wastewater. This is why we are carefully studying the possibility of leasing the city’s water and wastewater systems to a world-class operating partner. Our consultant’s analysis indicate a lease could generate a minimum of $50 million for the city to fund future-focused projects, while maintaining local ownership of the system.

Any potential lease of the city’s water and wastewater systems would have to achieve at least the following benefits:

• The costs to operate the water and wastewater systems will be reduced;

• The operating partner will hire current employees, subject to existing hiring policies, at comparable pay and benefit levels;

• The operating partner will be responsible for funding capital improvements, not the city; and

• Service quality and environmental standards must equal or exceed current practices.

In addition to these benefits, the city would retain ownership and oversight and the city council will establish water and wastewater rates.

The strong working relationship between City Hall and the residents we serve is yet another example of why O'Fallon is such a great community in which to live.

Gary L. Graham

O’Fallon Mayor