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Christopher Donovan, Amanda v. the County of Lake

July 8, 2011

CHRISTOPHER DONOVAN, AMANDA DONOVAN, ROBERT COOPER, AND
MARY COOPER, INDIVIDUALLY AND ON BEHALF OF ALL PERSONS SIMILARLY SITUATED, PLAINTIFFS-APPELLANTS,
v.
THE COUNTY OF LAKE,
DEFENDANT-APPELLEE.



Appeal from the Circuit Court of Lake County. Honorable Christopher C. Starck and Mitchell L. Hoffman, Judges, Presiding. No. 09-L-197

The opinion of the court was delivered by: Justice Birkett

JUSTICE BIRKETT delivered the judgment of the court, with opinion. Justices McLaren and Hutchinson concurred in the judgment and opinion.

OPINION

¶ 1 Plaintiffs, Christopher Donovan, Amanda Donovan, Robert Cooper, and Mary Cooper, residents of the Glennshire subdivision in the Village of Hawthorne Woods (Village), brought a class action against defendant, the County of Lake (County), seeking to prevent the County from issuing revenue bonds repayable solely by customers of the Hawthorne Woods-Glennshire (HWG) water system (water system), for the costs of constructing a new water system. Judge Christopher C. Starck granted the County's motion to dismiss counts I and II of plaintiffs' amended complaint and transferred the remaining counts to the court's chancery division. In the chancery division, Judge Mitchell L. Hoffman granted summary judgment in favor of the County on counts III and IV of plaintiffs' second amended complaint. For the following reasons, we affirm the orders of the trial court.

¶ 2 I. FACTS

¶ 3 A. Background

¶ 4 The water system was originally constructed between 1954 and 1962 and served 224 residences by delivering water from 20 shallow wells. Each well served less than 15 residences, which classified the system as a "non-community water supply" and therefore not subject to public water system standards. See 415 ILCS 5/3.145 (West 2008).

¶ 5 The wells in the water system have water distribution mains, or piping, measuring 11/2 to 2 inches in diameter and are located mainly in the back and front yards of private residences. Half of the water system was never under the Village's control and was acquired by the County in 1973 under an agreement to which the Village was not a party. In 1975, the Village contracted with the County for the County to take over the operation and ownership of the portion of the water system the Village controlled (contract hereinafter referred to as the 1975 contract).

¶ 6 In the 1975 contract, the County agreed to make any improvements to the water system that were required by the Illinois Environmental Protection Agency (IEPA). It also provided that, for operating, maintaining, or paying debts for improvements to the water system, the County was authorized to charge individual customers rates as required. Further, the contract provided that "[t]he County will from time to time issue revenue bonds to expand and improve the water supply facilities. Said revenue bonds shall be retired by funds derived from the local system."

¶ 7 In operating the water system, the County sampled and tested the water monthly at each of the 20 wells and sent the results of those tests to the IEPA. Between September 2000 and August 2005, three test results showed coliform exceeding the maximum contaminant level.

¶ 8 In 2006, the County obtained a permit from the IEPA to install interim chlorination facilities for the water system. Those facilities were constructed and made operational before August 2006. On September 19, 2007, the County submitted to the Village for its approval engineering and design plans for an IEPA-compliant water system, along with an application for a Village permit to site the new water system's distribution piping in the Village's right-of-ways and public easements.

¶ 9 Since the Village had permitted a competing water supply system, Aqua Illinois, to be installed in the Village subsequent to the 1975 contract, in order for the new water system to be constructed, the Village required the County to: (1) connect the water system to the Aqua Illinois water system; and (2) obtain its new water supply by buying water in bulk from Aqua Illinois.

¶ 10 To fulfill the Village's requirements, the County negotiated a "Water Supply and Sales Agreement" with the Village and with Aqua Illinois. This contract was effective May 12, 2009 (the 2009 contract).

¶ 11 In the 2009 contract, the parties acknowledged that the 2009 contract was a supplement to the 1975 contract. The parties also acknowledged that the water system was not originally constructed to public water system standards and that the water system was at that time more than 50 years old. The parties noted that the IEPA had cited the water system for various violations of state drinking-water standards and that the Illinois Attorney General had filed against the County an enforcement action that sought the replacement of the water system with a state-code-compliant public water system (PWS).

¶ 12 Among other things, the 2009 contract provided for Village authorization of a surcharge to water system customers' water bills to retire subordinate revenue bonds issued by the County to fund the construction of the new water system.

¶ 13 Regarding the local funding for the construction of the new water system, the 2009 contact, paragraph 3(g)(2)(I), specifically provides:

"Funding Mechanism for new HWG PWS. The Village acknowledges and agrees that the proposed County-issued subordinate revenue bonds, secured by a surcharge on the water bills to HWG area Customers, is an appropriate funding mechanism by which the County is authorized, under the terms of the 1975 Contract between the Village and County, to charge and collect from HWG area Customers, for the proposed new Code-compliant HWG PWS construction and related costs. The Village agrees that the County is authorized, upon issuance of said County subordinate revenue bonds, to charge and collect from HWG area Customers, a surcharge on the water bills of HWG area Customers to retire said County-issued subordinate revenue bonds."

¶ 14 The construction permit for the new water system was issued on May 8, 2009, and identified the approved water supply distribution piping as "17,207 feet of 4-inch water main, 2,490 feet of 6-inch water main, 12,373 feet of 8-inch water main, and 1,885 feet of 10-inch water main." The replacement water system would be an entirely new, code-compliant public water system, with distribution piping located in public right-of-ways and easements.

¶ 15 The initial estimates for the cost of building the new water system ranged from $23,000 to $25,000 per water system residence/parcel. However, following approval of the 2009 contract and the County's subsequent bidding out of the project, the actual cost for constructing the new water system is $11,600 per residence/parcel.

¶ 16 Before fixing the amount of the revenue bonds to be issued to fund the construction of the new water system, the County provided notice to the water system customers of the $11,600 per residence/parcel cost and offered the customers an opportunity to prepay that amount in a lump sum. Of the 227 parcels served by the water system, 144 customers prepaid the lump-sum amount.

¶ 17 For the 83 customers who had not prepaid, the County adopted and approved a subordinate revenue bond ordinance for the amount of $1,220,000, secured by a surcharge on those customers' water bills, to fund the remaining portion of the construction costs, and related projects, for the new water system. Sale of those subordinate revenue bonds closed on November 2, 2009, and the water system contractor was given a "Notice to Proceed" on November 3, 2009.

¶ 18 Plaintiffs' initial complaint was filed on February 25, 2009. Plaintiffs filed an amended complaint on June 2, 2009, and a second amended complaint on August 27, 2009.

¶ 19 B. Plaintiffs' Complaint

¶ 20 In count I of the amended complaint, plaintiffs alleged a cause of action for negligence. Generally, plaintiffs alleged that the County was obligated to chlorinate the water system's groundwater and that, because the County failed to do so, excessive amounts of coliform were detected on at least three occasions reported to the IEPA between 2000 and 2005. Plaintiffs alleged that the County had duties to responsibly operate and maintain the water system and that the County breached its duties by failing to do the following: (1) chlorinate the water system; (2) provide safe, potable water; (3) repair or replace water mains with monies from an adequate capital improvements fund; (4) set aside reserves sufficient to fund necessary capital improvements; (5) responsibly operate the water system; (6) responsibly maintain the water system; (7) make improvements to the water system as required by the IEPA; and (8) otherwise operate the water system in a reasonable fashion so as not to cause damage to plaintiffs.

¶ 21 In their appellate brief, as support for their claim that the County was obligated to make improvements to the water system, plaintiffs cite to section 2 of the 1975 contract, entitled, "Obligations of the County." That section provides, in pertinent part:

"[T]he County agrees to take over operation and maintenance of the existing water system and make the necessary improvements to the water system as may be required by the Illinois E.P.A."

¶ 22 Plaintiffs claimed that the County's breaches of its duties proximately caused damages to plaintiffs. Plaintiffs alleged the following as damages:

"[C]osts incurred for bottled water and filtration. In addition, Plaintiffs and the Class has suffered and will continue to suffer property damages. Property values in the proposed class areas have been impacted by Defendant's negligence, and such negligence threatens to cause Plaintiffs and the ...


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