On June 20, the Village of Skokie, three residents of Skokie and a business in Skokie filed a complaint in federal court in Chicago against the City of Evanston, Stephen Hagerty, individually as Mayor, and the City’s nine aldermen, all individually (the Skokie Complaint). The complaint alleges that Defendants are charging Plaintiffs excessive fees for treating and distributing Lake Michigan water to Skokie and its residents.

Skokie took the unusual step to filing this action in federal court, while a previously filed lawsuit is pending between Evanston and Skokie concerning the same subject matter in State court. Also in an unusual step, Skokie is seeking to hold Evanston’s Mayor and Aldermen personally liable for damages.

The Skokie Complaint

The Skokie Complaint alleges that Evanston’s Ordinance No. 95-0-17, adopted on Sept. 25, 2017, increased water rates for Skokie residents so they are forced to pay “an exorbitant rate for Lake Michigan water sold by Evanston.” The ordinance allegedly “sets the rate for the Skokie Plaintiffs at an amount that is 264% – 307% more than the amount Evanston charges to similar Lake Michigan water users located in adjacent and neighboring communities.”

The complaint alleges that Evanston has been operating its water treatment and delivery system as a profit center, and that it has transferred more than $58 million from its water revenues during the past 20 years to its general fund for purposes unrelated to the maintenance and infrastructure of its water system. The complaint alleges that Evanston possesses “a unique and profound power by virtue of the location and configuration of legacy water supply infrastructure,” and that it is using its power to set rates for Skokie that yield “excessive returns” for Evanston. The complaint alleges that Evanston has “a growing 10 million dollar deficit, which it seeks to plug with its discriminatory wholesale water rates on the Skokie plaintiffs.”

The ordinance set the rate for Skokie at $2.06 for 1,000 gallons of water, while the rate is allegedly $.67 for NWC Municipalities and $.78 for Niles and Morton Grove, according to the complaint.

In an effort to state a claim against Evanston’s Mayor and Aldermen for personal liability, the complaint alleges in conclusory terms on information and belief that they directed Evanston’s officials to “negotiate in bad faith, as a matter of retribution, to get back revenue that Evanston had perceived it lost through the previous agreement” that expired on Dec. 31, 2016.

The Skokie Complaint contains 12 counts alleging that Plaintiffs were deprived of notice and an opportunity to be heard and deprived of substantive due process and equal protection of the law, and it seeks a judgment declaring the ordinance is void and that Evanston must provide water to all of its customers at identical wholesale water rates. It also seeks a judgment for damages in an unspecified amount and attorneys’ fees.

Evanston’s Complaint

On Sept. 26, 2017, the City of Evanston filed a complaint against the Village of Skokie in State court, seeking a ruling that Evanston may charge Skokie $2.06 per 1,000 gallons of Lake Michigan water that Evanston treats and distributes to Skokie.

The Evanston Complaint alleges that Evanston operates a water treatment plant and that it has treated and distributed water from Lake Michigan to Skokie since 1944. Skokie in turn sells and distributes the water to its residents. A 20-year contract that governed the relationship expired on Dec. 31, 2016.

After that date, the complaint alleges that Evanston officials met with Skokie officials numerous times, provided them extensive documentation and attempted to negotiate a new long-term contract, but they reached an impasse in the negotiations. Evanston wants $2.06 per 1,000 gallons, and the complaint alleges that Skokie’s preferred rate is $0.70 per 1,000 gallons.

The Evanston Complaint alleges there is no written agreement between Evanston and Skokie, but says there is an implied agreement that Evanston will supply water to Skokie, and, in addition, under Illinois law, Evanston cannot stop providing water to Skokie unless and until Skokie secures an alternative water supply from another source.

Evanston is thus bound to provide water to Skokie, but the parties have been unable to agree on a rate.

On Sept. 25, Evanston’s City Council adopted Ordinance 96-0-17, establishing a new rate for water supplied to Skokie at $2.06 per 1,000 gallons of water, starting Oct. 1, 2017. A memorandum from David Stoneback, Evanston’s Public Works Agency Director, said the new rate is based on applicable ratemaking principles of the American Water Works Association M-1 Manual. In addition, the memorandum says the rate is reasonable when compared to rates charged by neighboring communities. As an example, Chicago charges more than 60 municipalities $3.88 per 1,000 gallons.

Evanston charges its residents $3.09 for 1,000 gallons of water, which includes the fee for delivering the water to residents’ homes or businesses.

The Evanston Complaint also acknowledges, though, that Evanston has a contract to provide Morton Grove and Niles water at the rate of $0.78 per 1,000 gallons in 2018, but the Morton Grove Niles Water Commission will be paying more than $80 million for a new pumping station and other infrastructure costs, and the rate may increase over time.

Unlike the Morton Grove and Niles contracts, Evanston maintains water pressure for the Skokie system, and supplies water through three delivery points, each with a 36-inch pipe.

The Evanston Complaint asks the court to find and declare that the rate of $2.06 per 1,000 gallons is a reasonable rate to charge Skokie for water.

Skokie has filed a motion to dismiss Evanston’s Amended Complaint, which is set for hearing on July 18.

In a prepared statement to the Evanston community on June 22, Mayor Hagerty said that Evanston is continuing “to provide safe, fresh drinking water to Skokie today just as we have for more than 70 years.”

He adds, though, that “the time has come for Skokie to pay its fair share.

“[T]he fact is, Evanston families—including many who are struggling financially—have been subsidizing the delivery of water to Skokie for decades, and it’s time for that to end. Evanston water rates remain among the most affordable in the Chicagoland area. Even with an increase over the current rate, Skokie residents will be well served.”