Chicago water bill collections plummet after threat of shut-offs removed

Days before taking office, Mayor Lori Lightfoot declared water a “basic human right” and ended water shut-offs that had cut off a “lifeline” to low-income families struggling to pay skyrocketing water bills.

Chicago appears to be paying a heavy price for that kinder, gentler approach. And it could have long-term ramifications for the largest of four city employee pension funds.

Since Lightfoot ended the ultimate weapon against water scofflaws, monthly water bill collections dropped by $20 million — from $74.7 million in October to $54.6 million in November and $55.5 million in December. January collections were $61.8 million.

An even bigger red flag is February. Through Feb. 17, water bill collections were $13.8 million, according to records released to the Chicago Sun-Times in response to a Freedom of Information request.

City Comptroller Reshma Soni said she’s not concerned about the early February drop, noting: “A lot of the bills we have are due at the end of the month” and take a few days to process.

The city anticipated and “planned accordingly” for a “slight decrease” in water collections tied to water conservation, increased meter use and the decision to stop shutting off water service, she said. A similar seasonal drop in water usage occurred last fall, she said.

“Whenever you [cut off service], of course people would want to come and pay quicker. It’s more about the timing of the payments coming in,” she added. “In the long run, we’ll have more collections because people will have an easier way of paying.”

Civic Federation President Laurence Msall warned the precipitous decline in collections could spell trouble for the largest of four city employee pensions.

Four years ago, the City Council slapped a 29.5% surcharge on water and sewer bills to save a Municipal Employees Pension Fund that had $18.6 billion in unfunded liabilities and was due to run out of money in 2025.

Water bill collections are the base upon which the surcharge is applied. When collections plummet, revenues fall short of the amount needed to keep the city’s largest pension fund on the road to 90% funding.

“It’s clear that these one-off funding mechanisms — whether it’s water, 911 fees or even property taxes — are not sufficient to keep these funds in a safe place financially,” Msall said Tuesday.

“The bigger question is whether it’s sustainable to fund the Municipal pension fund with water receipts. … What’s driving the drop in collections? Is it consumption? Is it something else? Or is it the lack of the threat of turn-offs? We encourage the city to come forward with those details to demonstrate why there is such a significant drop.”

Jeff Johnson, a trustee of the Municipal Employees Pension Fund, isn’t overly concerned about the drop in water collections and its impact on the surcharge — even though the fund’s assets cover just 24% of liabilities.

“The statute requires that we get our $421 million this year no matter what. The funding source doesn’t matter to us. It’s nice to identify one. But we still get the money either way,” Johnson said, noting that the ramp to actuarially-determined contributions will end in 2023.

“If they’re short at water, they would have to find the revenue somewhere else. ... That [surcharge] was supposed to be the vehicle. But we can get money from property taxes. It doesn’t just have to be the water tax.”

For decades, water shut-offs have been the ultimate weapon against scofflaws — a list that once included scores of city employees and workers from other local government agencies.

Lightfoot’s transition team proposed removing water shut-offs from the city’s arsenal. The new mayor embraced the recommendation days before taking office.

“Water is a basic human right. And when you cut somebody off from water, you’re effectively evicting them and putting them on the street. We will not do that in the city. That is a heartless act,” she told her transition team to applause on May 17.

During a nine-month investigation, American Public Media Reports analyzed water shut-off notices between 2007 and 2018 and found they were concentrated in black and Hispanic communities.

The cost of water for the average family of four in Chicago “nearly tripled” during that period, the investigation found.

“When I learned of this, I picked up the phone and had a conversation with the water commissioner. I directed him, ‘There will be no water shut-offs,’” Lightfoot said just days before taking office.

The city’s most recent audit showed water sales rose from $369.9 million in 2009 to $754.8 million in 2018. In 2009, the city had 318,088 non-metered accounts and 179,649 metered accounts. Ten years later, the reverse was true, with 313,758 metered accounts and 180,608 non-metered accounts.