Oak Brook has sold the noncorporate portions of its water system, serving those not within the village boundaries, for more than double the price originally offered.
An offer in 2019 of $5.5 million from Illinois American Water ultimately was not accepted, and the sale was closed Nov. 29 in a deal for $12.5 million with Aqua Illinois.
The concept regarding a sale of the noncorporate portions of Oak Brook’s water system evolved over may years and through different iterations of which zones made the most business sense to sell, versus retain, Village Manager Greg Summers said.
He said that with the guidance of the Village Board, the final decision was to issue a Request For Proposals to the market in order to maximize sale value in a competitive bid environment. The original reported offer from Illinois American for $5.5 million, is the same amount the company later bid through the RFP, Summers said. However, the competitive bid process allowed for Aqua Illinois make its bid of $12.5 million.
“Had the village settled for the original $5.5 million offer, $7 million dollars would have been left on the table,” Summers said. “Fortunately, the Village Board pursued the RFP process in order to let private market competitive forces value the system.”
Summers said his full financial evaluation showed that the $12.5 million offer reflects a fair value, based upon long-term operating and capital replacement costs.
“It is clear that the original $5.5 million offer fell far short of fair market value,” he said.
Along with a better sale price, several amendments were made to the contract with Aqua Illinois during the final weeks leading up to the sale that enhanced revenues to, and protections for, the village, Summers said.
The amendments include a buy back provision that would allow the village to purchase back any portion of the system if the area later becomes a part of Oak Brook, an indemnification/attorney fees reimbursement provision should the sale result in any type of litigation, and modifications to the interim supply agreement that increases the village’s overhead charge to Aqua and shortens the time frame on which they have to fully disconnect from Oak Brook’s water system.
“All three of these agreement enhancements were based upon direct requests and discussion put forth by (Village Board member) Michael Manzo, who in fact, negotiated the increased water charges to Aqua himself,” Summers said.
Manzo said it was clear to him that information was not being properly vetted by prior village staff.
“How could the value of the portions of the water system outside the village suddenly change from $5.5 million to $12.5 million in less than a year,” he asked, adding that the proper vetting of the $12.5 million sale, by Summers, who began work in Oak Brook at the beginning of 2022, was more of a fair deal and not a great deal, as it was presented to the Village Board in March 2021.
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Manzo said he also became some what suspicious when he found that both Illinois American Water and Aqua Illinois had easily identifiable failures in the past.
“If I could find them via Google, why couldn’t our prior staff identify and vet these issues before they brought the sale to the Village Board?” Manzo asked.
He said that when he identified a potential issue with the Lisle water sale to Illinois American, Village President Gopal Lalmalani immediately contacted Lisle Mayor Joe Broda to get an accurate account of events.
“Fortunately, this call stopped the $5.5 million dollar sale from proceeding, and we later received the bid of $12.5 million from Aqua Illinois,” Manzo said. “One simple act of diligence netted the village an additional $7 million.
“Even though I was not in agreement with the sale of our water system, I am happy I was able to add two last-minute amendments to the sale, which protect the Village of Oak Brook in the future.”
All noncorporate customers have been notified of the sale and provided with Aqua’s contact information. Oak Brook has issued final bills to those customers, and Aqua has taken over operation of those areas.
“For the foreseeable future, the village is committed to assisting in the transition, whether it be by accommodating calls for service, providing these customer Aqua’s direct contact information, or assisting with our long-term institutional knowledge of these portions of Aqua’s water system,” Summers said.
Chuck Fieldman is a freelance reporter for Pioneer Press.