Peoria's water company has likely grown considerably more expensive since the last time it was appraised in 2005. But some members of the Peoria City Council say they want to see the due diligence process through.
The city is paying consulting firm Woodard and Curran to conduct an initial assessment of a potential water company buyout. The city has the option to buy back the water company from privately-held Illinois American Water every five years, per terms of the original 1889 sale.
Project manager Morgan Roper said the $220 million valuation made 18 years ago is more than $345 million today when adjusted for inflation. The annual debt service would hover between $20.3 million for a 40-year loan term and $27.9 million for a 20-year term, factoring in an assumed 5% interest rate.
Numbers based on benchmarked costs of Illinois American Water's sale of a New York subsidiary last year come out to $277 million, and $300 million is an estimated middle value between the two. The annual debt service for those estimates hovers between $16.2-$22.4 million, and $17.6-$24.2 million, respectively, based on the loan length.
Roper noted Peoria pays nearly double the costs of publicly-owned water systems, coming in second only to Champaign in a sampling of several Illinois cities for average residential rates. But she projected the average annual cost of $669.51 for residential consumers would balloon to $850.28 if the city buys the water system.
There are still a lot of other factors that could influence the final valuation, however. Roper said figuring out the true current value of the water company will likely cost $2 million to $4 million.
At-large councilman Zach Oyler challenged that due diligence cost estimate at Tuesday's city council meeting, claiming it was "significantly larger" than what he'd estimate. Roper said the estimate was based on recent water system purchases, but Peoria's costs could be lower.
5th District councilman Denis Cyr said he cannot make a decision on whether to move forward without the due diligence process to ascertain the system's value.
"We have too many questions. And we need we need exact numbers, not just if this, if that, some averages, and all that," he said. "There's no way I would want to spend our taxpayers' money not knowing exactly what the deal is exactly."
He noted the water company generates $43 million a year, and that may ultimately be a valuable revenue source for the next generation of Peorians, even though an acquisition would be painful for the next few decades.
At-large councilman Mike Vespa said options like federal infrastructure funding available to public water systems replacing lead pipes may help offset costs if the city were to own the water company.
"I would like to dive deeper. Because if that could get us below the 23 hundreths of a cent per gallon, then it's a no brainer. But if it can't, it's a much harder decision," Vespa said.
Peoria Mayor Rita Ali said the council has a lot to think about, but she has reservations.
"What weighs heavily on my mind and my heart, and I guess my gut, is debt, debt service, heavy, deep debt service, in light of our current pension liability over the next 16 to 17 years. That's going to increase exponentially between now and 2039," she said.
The city of Peoria's net pension liability was pegged at nearly $375 million in the 2022 annual comprehensive financial report.
2nd District councilman Chuck Grayeb is the dean on the horseshoe. He's seen the buyout debate play out several times, with the council always ultimately choosing not to purchase the water company. But he said it's still good to regularly have the discussion.
"We never want to give away the ability to revisit this and to get the empirics on it. Perhaps we'll decide as a body that this isn't the correct time to do it. Maybe it'll be a future council that'll do it. Maybe it won't," he said.
The Peoria City Council will decide whether or not to continue with the buyout process at its Oct. 24 meeting. The last day to act is Nov. 3.
