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Village of Niles v. City of Chicago





APPEAL from the Circuit Court of Cook County; the Hon. RAYMOND K. BERG, Judge, presiding.


This appeal involves an action brought by 47 suburban communities, on their behalf and on behalf of all 74 suburban municipalities within the Metropolitan Sanitary District of Greater Chicago, challenging the legality of the rates which defendant, city of Chicago, charges the suburbs for the purchase of water. Plaintiffs seek to enjoin the city from charging what are alleged to be unreasonable water rates and from discriminating against them and in favor of certain users residing within the city. In addition, plaintiffs seek to compel the city to account for over $26,000,000 in water charges collected under this rate structure. The circuit court of Cook County struck plaintiffs' first amended complaint, finding it failed to state a cause of action, and dismissed the lawsuit.

Plaintiffs contend on appeal that the first amended complaint states a cause of action showing that the city's metered water rates are unreasonable and discriminatory as applied to these suburban communities.

We reverse and remand.

The following facts are alleged in the first amended complaint. Prior to the year 1900, the city of Chicago obtained its water supply from Lake Michigan. The city also pumped most of its sewage into the lake, causing a serious pollution problem. In 1889, the legislature sought to remedy this problem by enacting "An Act to create sanitary districts * * *." (Ill. Rev. Stat. 1977, ch. 42, par. 320 et seq.) Since the sanitary district created by the Act included territory outside the city which was taxed for the district's operations, section 26 of the Act required the city to supply water to any incorporated community within the metropolitan sanitary district that requested such service and provided a pipeline to receive the water at the city limits. Ill. Rev. Stat. 1977, ch. 42, par. 348.

At the time of the adoption of the Act, Chicago had a classified rate for its water users that decreased as the volume of water consumption increased. Subsequently, the city eliminated the classified rate and adopted both a single-metered rate and an assessed, or flat-rate, water charge. Metered customers are charged on the basis of the measured volume of water supplied. The assessed customers are charged a fixed annual charge, calculated by the size and nature of the facility served.

The first amended complaint alleges that the 74 suburban municipalities, which are totally metered users, comprise a unique class. These suburbs and their residents represent approximately 27% of the entire population served by the city water system and total approximately 1,250,000 persons. As "wholesale" customers, the suburbs receive water from the city at the city limits and distribute it through their own individual water distribution systems to their resident-consumers. The costs of the suburban distribution systems are in addition to the cost of the water supplied by the city, whereas the costs associated with intracity distribution are recovered as part of the city's water rates. The suburbs must install all of the metering and water control equipment according to city specifications, maintain specified reservoir capacities, and receive their water supplies from the city at a uniform rate of flow.

The suburbs purchase about 18% of all water distributed by the city water system. This percentage amounts to approximately 161,000,000 gallons of water every day. In contrast, of some 504,000 water connections within the city proper, only 157,000 connections are metered and charged the same single-metered rate as the suburban communities. The remaining 347,000 connections in the city are not metered. At least 50% of the total water supplied by the city system, or in excess of 500 million gallons per day, is unmetered. In 1975, the per-capita consumption of water in the city was 250 gallons per day, compared to 139 gallons per day in the suburbs. As a result, the effective rate per 1,000 gallons of water used within the city is lower than the metered rate charged the suburban users.

The first amended complaint charges that the metered rates adopted by the city are illegal as applied to the 74 suburbs for the following reasons. The suburbs, while purchasing about 18% of the water pumped by the city, account for approximately 27% of the city's total water revenue. This compares to the unmetered intracity customers, who produce approximately 21% of the city's total water revenue, while unmetered water accounts for in excess of 50% of the total water supplied by the system. Based on the city's cost figures for October 1973 through December 1976, plaintiffs estimated that the water rate paid by the suburbs was approximately 60% more than the cost of servicing the suburbs with water for this same period. The revenue per 1,000 gallons produced by the suburbs was about 81% higher than the revenue per 1,000 gallons produced by the Chicago unmetered or flat-rate customers, and about 36% above the average revenue per 1,000 gallons for all customers, both metered and unmetered, within the city limits.

It costs the city approximately $7,000,000 a year to deliver, meter, bill and collect for all of the water served by its system. An estimated 98% of these costs are attributable to the 504,000 connections representing customers living within the city itself. This entire expense, however, is an element of the water rates charged both city and suburban customers, although the city does not incur a similar expense for water distributed to individual consumers served by the suburban distribution systems.

The city has an excess pumping capacity of 1,500,000,000 gallons a day. One of the primary reasons for this standby capacity is to insure adequate fire protection for the people and property in the city. In addition, there are approximately 46,000 fire hydrants in the city which cost in excess of $3,500,000 per year to maintain. These costs, attributable to intracity fire protection, are recovered from the water rates which the suburbs must also pay. The suburbs, however, maintain their own fire departments and fire hydrants.

Another element of cost figured into the water rates relates to the maintenance of the city sewer system. The first amended complaint alleges that certain payments made by the city water department to the city's corporate general fund are improper charges for the maintenance of the city sewer system and are of no benefit to the suburbs. It also alleges that the city gives away over $5,000,000 worth of water every year to various municipal, religious, charitable, educational, State and county facilities located within the city while the suburbs must pay for all water distributed to similar institutions located within their communities.

For these reasons, plaintiffs allege that the charges and rates, as set by city ordinance in 1973 and 1976 *fn1, discriminate against the suburbs in violation of the equal protection clauses of the State and Federal constitutions (Ill. Const. 1970, art. I, § 2; U.S. Const., amend. XIV), and, further, that these charges and rates, as applied to the suburbs, are arbitrary and unreasonable in violation of section 26 of "An Act to create sanitary districts * * *" (Ill. Rev. Stat. 1977, ch. 42, par. 348).

The suit seeks to enjoin the city from discriminating against the suburbs in favor of the users residing within the city limits, a reduction of approximately $10,000,000 in their annual water rates and a recovery of over ...

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