O'Fallon Progress

Letter to the Editor: Concerns abound over potential lease of water and sewer departments

To the Editor:

I’m writing this letter to express to you my personal concerns over the possible lease of our Water and Sewer Departments to a private firm for 40 years or so.

This is being written after reading over 150 documents on this subject and being in contact with over a dozen other communities. You may have heard some pieces of information on this but I’m not sure if all of the concerns and facts have been spelled out clearly or accurately. For example, a recent flier stated that the City Council was proposing new taxes.

This was stated to be NOT TRUE publicly by the city council at the March 16 city council meeting. Recently the Illinois Attorney General released documents that the City Administration had not disclose previously to the citizens of O’Fallon or the Council about this issue. After hearing about the private meetings, the comments made, and the people & companies involved that the council was not aware of, I thought that I should share with you some of my findings, and where they come from.

I apologize for the length but you should know these facts.

For the record the City Council has not seen any proposals from any prospective bidders, and the Council has not prioritized (even though some Council members have asked to do so) any use of the money gained from such a lease if it were to be approved by you.

After reviewing the inaccurate documents sent out to our citizens and city documents that were required to be released by the Attorney General, I’m truly concerned about the openness and transparency that has occurred about this to everyone. For example, why shouldn’t you know in advance WHAT THE CONTRACT REALLY SAYS and HOW THE MONEY WILL BE SPENT before you are asked to approve or give a blank check? The city could have required that all of this was available prior to you being asked to vote.

The City Water and City Sewer have been in existence for over 80 years. Many people do not think about it because it is there when you need it. But these two services are probably among the most important to the Quality of Life of each of us and to the future development of our city.

Having seen many studies of other communities, here are some of my concerns about leasing our city’s water and sewer facilities and services:

• The City of O’Fallon’s Water and Sewer Departments have over $7 million in surplus to help defray emergency expenses without having an extra charge put to the citizens. If we lease to a private company, where will the cash that now goes to your reserves go? Will it go to profit or dividend?



• Your, Water and Sewer Departments reinvest about $1.5 million a year to modernize systems and to replace old lines before they fail. If we lease to a private company, will this continue without additional cost to the citizens of O’Fallon or will the 1.5 million go to profit or dividend for the private company?



• Why have many communities like Atlanta, Georgia; Fort Wayne, Ind.; and two local communities that have been rated in the

top 100 Best Communities to live in

(St. Peters, Mo., and O’Fallon, Mo.) taken back the operations of their cities water and/or sewer operations from private operators, and now state that they are saving money and/or delivering better service by doing it themselves? Mount Vernon, Ill., just abandoned its plan to go with a private company.



• I have received concerns from local contractors on how this could impact our future development. It has also been questioned by some of the cities Department Heads. I have heard from people in other communities about the problems that they have encountered when their communities tried this. Some of them have spent over $100,000 to try to get out of their contract.



• If we find out later that we want out of the lease, we will have legal fees and we will have to repay a prorated portion of the money that the city received up front plus interest. Where will that money come from?



• The Water Department Budget for 2016 will pay for over $ 2,000,000 in Salaries, Material and Storm Water costs outside of the Water and Sewer Department. Over 40 years—with an inflation rate of only 1 percent per year—that will amount to $90 million dollars that will be needed from somewhere else during the life of the lease if approved. Will this $2 million a year also go for profit and/or dividends with a private company?



I have been involved with acquisition and merger teams a number of times in my career and NEVER have I seen someone acquire or attempt to acquire the use of something without a plan to recover their investment and to make a profit/return on investment as well.

When you look at our water and sewer departments, there are only a few ways to recover a multimillion dollar investment and make a profit.

During the visits by seven firms to look at our water and sewer systems, the City Administrator told us that people were impressed with what they saw in your two systems. I have personally heard comments from people with ties to some of these organizations. I was told that they were pleased with both the systems and the management of your two systems, so much so that they would make an offer because it would be good for their companies but this comment was also made: “Herb, I’m not sure if it will be the best thing for your customers.”

When you see the amount we are able to put into reserves, cover other city expenses, have rates 40 percent less than local communities with Private Water Companies and what we spend on improvements to our water and sewer systems, is there any wonder why these private companies would want control of your water and sewer systems? This money could now go for their profit or dividends at your expense.

The council has received from the city’s administration seven examples of cities that had sold or leased their water and/or sewer systems. I decided to look into those, and I discovered that, of the seven:

• At least five had significant financial/debt problems.



• At least two faced significant EPA requirements…one sighted by the EPA for Overflow Problems with costs of possibly over $200,000 while being run by a private operated company.



• One had laid off over 60 employees and had $19 million in legal claims against the city.



• In one city the Deputy Clerk was arrested for soliciting a hit man to kill a councilman.



• One uses the same county owned water system it has been under since it was incorporated.



A common thread among most of the cities that have sold or leased their water and/or sewer is that they have significant debt and /or they are under heavy requirements from the EPA that will require major investments because they have not done so in the past. Even O’Fallon’s own consultants have confirmed this.

This is not the case in O’Fallon. Less than 20 percent of the city’s debt has anything to do with your water and/or sewer department. Most of our debt was established to cover park expansions and the Convention Center. O’Fallon’s own consultants say that we are not doing this due to financial problems.

Here are some items to consider:

• The City of O’Fallon has the ability to reduce water costs or lower amounts of increases when the surplus gets beyond a needed amount. Will a private firm do that—or put it to profit or dividend?



• Here in O’Fallon, you have direct input to those of us in office on concerns that you have about the rates or service of your Water and Sewer Departments. Will it be as easy to contact the people in Paris, France or New Jersey that run the companies being considered?



• We also know that the three closest communities that have private water companies controlling their water supply charge

40 percent or more

than O’Fallon does for the

same

water.



• The NATIONALLY known Black and Veach Report states that over 70 percent of the reasons for not considering going to a privately run operation is due to LACK OF DEMONSTRATED BENEFIT AND UNCERTAIN FINANCING IMPLICATIONS.



O’Fallon has over $50 million of debt and spends between $4 and $5 million on debt service annually. It was created by the City Administration and the city council due to decisions and priorities, made primarily between 2000 and 2010 on how to spend your dollars.

I don’t believe that we should now lease an asset that is so important to every citizen’s quality of life to do items which can be covered through other means or which can be done gradually over a period of time through proper prioritization and budgeting of the dollars we have.

I say this because over 38 percent or $55 million on the list furnished to the council by the City Administration are definitely not needs but fall into the category of wants.

The city of Fairview Heights has come out in opposition to the lease of the O’Fallon water department because it will impact many of its citizens that are on our water system. They stated that “they believe that their residents are best served by an open, publically accountable water system.”

The proper use of citizens’ dollars seems to be a common thread. Even the City Administration’s top advisor on this project (Stephen Goldberg) had these problems in the past. As the former Mayor of Indianapolis, he increased that city’s debt by 60% during the eight years that he was in office. He too had a problem of wanting to spend more than he had.

I believe that it is time for the citizens of O’Fallon to say, ”reprioritize the city’s spending and manage the dollars that we already receive, and do so in the most fiscally responsible manner”; the same as you do in your homes or businesses. This can be done WITHOUT TAX INCREASES.

To me, prioritization means taking care of the needs and essentials first and the wants when you can afford them or when you ask tax payers if they would want to pay more for them. It is NOT by leasing out essential departments to get money and then requiring users to pay for it through their water bills.

Why just before you are asked to vote do people tell you that your taxes may be going up if we don’t lease or sell the water and/or sewer? You should not be threatened about FALSE tax increases and other UNTRUE statements. Many of these needs have been there for years but ignored so that the dollars could be spent on other items; plus, the City has over 35 million dollars in total city reserves.

Here are just a couple of many items that were not disclosed to the Council or Citizens until the Illinois Attorney General’s ruling. They raise a lot of questions about the reason the strategic planning sessions were held and the openness & integrity of the process:

• Did you know that a Draft of the Consultant Agreement on the lease of the water and sewer was basically put together by the Administration two months prior to any Strategic Planning meeting of the Public and one (1) year before the Aldermen set their priorities?



• Two of the consultants used on this project have had serious legal problems. One was sighted by the Security and Exchange commission and fined thousands of dollars for failure to deal fairly.



• Another of the consultants was investigated by the FBI and pleaded guilty to Fraud.



• An individual who works at the same company that employs two spokes persons for the vote “yes” group, has been paid thousands as a consultant for the city .



• A City department head wrote to one of the attorneys involved “Pretty sure half the Aldermen haven’t put the pieces together.”



I would ask YOU, do you think we should lease YOUR water and sewer systems so that we have $40 million for a City Center (which no one has seen formal plans or an operating budget for and which the City Council removed from last year’s budget) and an additional $15 million for the Sports Park?

You will have the opportunity to tell us if you want us to lease YOUR water and sewer systems, so that the city can spend beyond its income and continue spending practices based on the wants of some, or if you want us to start managing our finances based on the needs of our community.

It is YOUR decision but based on my studies, I would encourage you to please VOTE “NO” on BOTH issues relating to the sale and/or lease of YOUR water and sewer system on April 7.

Herb Roach

O’Fallon

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