PEORIA, Ill. (WMBD) — Buying out Illinois American Water’s infrastructure would set the city back possibly up to $345 million, which equates to about $22.6 million a year, a consultant told members of the city council on Tuesday.
Now, members of the Peoria City Council have about three weeks to decide if they want to let the water company know by Nov. 3 that they intend to begin the process or take a pass and reconsider the whole thing again in five years.
On Tuesday night, Woodard & Curran, a national firm with offices in 13 states, gave a detailed presentation to council members about their study into the economics of the city buying the waterworks.
In June, the Horseshoe voted to spend just shy of $100,000 to hire Woodard & Curran to investigate whether it’s feasible or not. And on Tuesday, they got the results of that study.
Among the findings by the consultants:
- The last time the city seriously considered a buyout was in 2005. Back then, the appraised purchase price was about $220 million. Now it’s $345 million based upon inflation. And that’s assuming Illinois American will not seek a higher price, as Peoria is about 16% of their operations.
- Using the recent sale of a New York facility, the city could pay as little as $277 million but that’s well below the $345 million figure.
- City Hall would have to write a check for $22.6 million every year for 30 years to cover the cost of the buyout, as well as interest and other fees. That’s assuming an annual interest rate of around 5%.
- Peorians pay about $669 a year, on average, for their water bill. That would rise to $850 a year if the city went through the buyout. That’s assuming usage of 3,000 gallons a month.
- It could cost the city between $2 and $4 million alone to do “due diligence” and to appraise the waterworks.
The consultants noted that if Peoria were to buy out the company, it could mean a 17 to 27% increase in the current water rates, which are 0.9 cents for each gallon. The rate could go up to 1 to 1.1 cent per gallon.
“. . . actual rates would vary based on the final appraisal, loan terms, as well as customer type and amount of water usage,” the consulting firm said in their report.
Since 1889, the city, by law, can consider every five years whether to purchase the water system or not. The last time that happened was in 1998. The evaluation process lasted until 2005 when the council vote stopped the buyout.
Proponents said it’s a good idea as it keeps profits within the city and City Hall can try to keep tabs on the rates. Opponents counter that it’s too expensive for the city, which doesn’t have the expertise of running a utility.
During a nearly 40-minute discussion at Tuesday night’s meeting, council members were trying to get a sense of the numbers. One wanted to get a handle on why the preliminary work to look into the buyout would cost so much.
Others wanted to know why Peoria or Champaign — both of which are serviced by Illinois-American — were paying more than cities who owned the waterworks. Still, others wanted to know a bit more about interest rates and the city’s bond rating.
“We have too many questions. And we need exact numbers, not just if this, if that, some averages, and all that,” said Fifth District Councilman Denis Cyr. “There’s no way I would want to spend our taxpayers’ money not knowing exactly what the deal is exactly.”
He said he has “hundreds of questions” now and five years ago when the council last dealt with this. “Who would run it?” He asked, noting he couldn’t make a decision until he had more information.