Report: Harvey selling Homewood water at a loss

Receiver seeks new contracts with downstream towns

Harvey may seek a new water contract with Homewood and other downstream municipalities after a new report suggests the city isn’t profiting.
 

Robert Handler, a court-appointed receiver tasked with overseeing Harvey’s water department, looked at the rates the downstream municipalities were paying for water. Handler is the principal and CEO of Commercial Recovery Associates.

Of the five towns that get water through Harvey, only Homewood is actually under contract. That agreement expires on Dec. 16, 2022.

Flossmoor receives its water from Homewood.

Handler’s latest report, which was made public on Feb. 23, states that Homewood pays a rate of 0.0325 dollars per cubic foot of water. That’s a lower rate than any of the other municipalities that buy water from Harvey.

Harvey’s water expenses are 0.048 cents per cubic foot, according to the receiver’s report. 

Harvey purchases water from Chicago for $0.028. The report estimates that, factoring in a loss of about 17.5 percent through leaks in the system, Harvey’s true cost is about 0.349 cents per cubic foot. There are 18 main line leaks and 126 fire hydrants that are out of service in Harvey, per the report. Fixing the hydrants alone will cost an estimated $600,000 to $700,000. 

In addition, the Harvey water department’s general, auto and umbrella insurance was canceled on Nov. 9 due to nonpayment of premiums, according to the report. The receiver was able to secure coverage about a month later through third-party insurers. 

“They had to go out, being the water department, and purchase insurance on their own,” Homewood Village Attorney Chris Cummings said. “You’ve got to think that’s going to cost more for one department than if they would have purchased it for the whole town.”

In January 2017, Harvey was ordered to begin paying down over $22 million it owed to Chicago in unpaid water bills. 

Cummings said the village disagrees with the idea that Harvey is being forced to sell water to Homewood at a loss. He said Homewood shouldn’t have to pay for the financial failures of Harvey, which have resulted in needed repairs to its water system. 

“If they hadn’t diverted all the money over all these years and using that money instead to maintain the system, then their water loss wouldn’t be nearly as high,” Cummings said. “That’s really Harvey’s responsibility.”

Homewood met with Handler on Jan. 4 and again with Handler and all the downstream towns on Jan. 5. An email attached to the report summarizes that meeting and announces an intention to put together new contracts for a minimum of 10 years. 

Cummings said Homewood intends to make Harvey continue to recognize the current contract, which was negotiated in 2012.

“Nobody’s moved yet to cancel it or rescind it and it’s our position that it’s a valid contract,” Cummings said. “We should stick to the contract because that’s what a contract is. Theoretically, I suppose they could go to court and try to convince a judge otherwise and we would certainly honor that.” 

Harvey also sells water to Hazel Crest at loss, per the report. Hazel Crest is paying .042 cents per cubic foot. East Hazel Crest, Posen and Dixmoor all pay above .05 cents. 

But Homewood’s rate is most significant because, according to the report, Homewood and Flossmoor use about 50 percent of the downstream water. That’s about 30 percent of the total water used by Harvey.

A copy of the 87-page report can be found online

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