A legal battle between Chicago and one of its suburbs is turning increasingly heated, with the city accusing Harvey of “stealing” tens of millions of dollars worth of water while the suburb’s spokesman implied that it’s been gouged for years by its bigger neighbor.
A Cook County judge on Friday denied a second request by Chicago for the court to take control of a lucrative stream of money that Harvey collects from selling Chicago water to tens of thousands of south suburban residents and businesses. But the judge did order both sides to meet to work out what documents are still needed to shed light on what happened to the money.
In the meantime, both sides say they’re being taken advantage of by the other. It’s the latest debate surrounding a suburb the Tribune has found is arguably the area’s most lawless with a high violent crime rate, subpar policing and a nearly insolvent budget.
To Chicago’s attorneys, what happened over the past six years is theft mixed with fraud. Chicago by law must supply water to Harvey. The suburb resells the water to its residents and five other suburbs, the lawyers said, without paying Chicago for much of it. Harvey has provided “false and misleading” records of where the money actually goes, with its comptroller once saying the cash helps cover budget shortfalls.
To Harvey’s spokesman, Sean Howard, it’s a case of a poor suburb held hostage by Chicago’s massive, repeated rate hikes. Sure, the suburb got behind on its bills, he said, but partly because the mayor wasn’t willing to pass the rate hikes on to his poor constituents.
“We will own up to our debt, but we want to get to the table and talk about how we can limit these (rate) increases, because it’s got to stop,” Howard said.
Even the amount owed is now in dispute. Chicago for months has said the suburb owed $20 million, plus $4 million in late fees. Chicago pointed not only to its own figures but a record it said Harvey provided with figures showing a debt of at least $20 million. But on Friday, Howard said the true amount owed is less than $15 million, based on the new town comptroller’s review of records.
Either way, the increasingly bitter two-year legal battle comes as the suburb’s longtime mayor faces mounting pressure from inside and outside Harvey.
Federal officials, as part of a criminal probe, have subpoenaed records involving Harvey’s last comptroller. The Securities and Exchange Commission, alleging fraud, persuaded a judge to shut down the town’s ability to borrow. And the town’s council could vote Monday to invite the Cook County sheriff to audit Harvey’s Police Department — an idea previously fought by the mayor.
Harvey aldermen, increasingly at odds with the mayor, have told the Tribune they’re looking for ways to drastically cut the budget. At least one has said he fears the town couldn’t make payroll if it lost access to the cash generated from reselling Chicago water.
Chicago’s attorneys have argued that Chicago has, in essence, kept the suburb financially afloat by providing it water, as required by law, that Harvey can turn into a cash magnet. Chicago has fought for records to prove the misuse, with Cook County Associate Judge Rita Novak last month ordering the suburb to produce documents showing where the water money went.
But Chicago alleged in court filings last week that despite turning over thousands of records, Harvey failed to deliver a comprehensive accounting of how it handled the water money and that what it did send was “false and misleading.”
A private attorney representing Chicago, Shelly Kulwin, told the judge Friday that Harvey is simply stalling: “The reality of it is, they delay, delay, obstruct, obstruct, delay.”
An attorney for Harvey, Benjamin Jacobi, has countered in a legal brief that the suburb provided about 15,000 documents, none of which were false or misleading. He said Harvey this month paid its July bill for nearly $900,000 — its first payment since March.
But he acknowledged not providing key records — recent years of legally required, independent audits of how the town spent cash — because Harvey’s longtime comptroller “apparently neglected” to do them. Jacobi said a new comptroller is doing his best to get the audits done.
After the hearing, the town’s spokesman took a different tack, questioning Chicago’s actions over the years.
Howard noted that Chicago charges about 21/2 times more for water than it did in 2006 and questioned the city’s reasoning that the extra cash is needed for infrastructure improvements. He said Harvey Mayor Eric Kellogg plans to call for “some intervention from the Illinois legislature to make sure these increases are fair and not just being used to balance future budgets for the city of Chicago.”
Howard said the suburb went into part of the debt because Kellogg didn’t pass Chicago’s rate hikes on to Harvey residents, many of whom “can’t afford the increases in the water rates.”
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Still, at least one Harvey alderman doesn’t believe Chicago was stiffed for purely altruistic reasons. Ald. Keith Price said water bills in town have gone up, and he suspects Kellogg’s administration misused at least some of the water money, although he said it’s impossible to know since Kellogg’s aides haven’t given aldermen any accounting of how the money has been spent.
In the meantime, regarding the water lawsuit, the judge Friday ordered both Harvey and Chicago’s attorneys to “sit down and talk” within a week to try to settle what documents are owed and can be provided.
But in a sign of just how contentious the lawsuit has become, the lawyers attempting to set up that meeting ended up in a shouting match outside the courtroom. It ended only when they were informed that the noise was so loud it was interrupting another hearing that had begun in the courtroom.
Twitter @mattwalberg1