Daily Archives: October 16, 2008

City Council, City of Peoria, Illinois American Water

Water buyout mania starts again

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I got a letter from Illinois American Water today (as I’m sure many of you did, too). I thought it was going to be a report on water quality, but to my surprise, it’s the first volley in the quinquennial fight over the City’s attempt to take over the water company! The pertinent portion of the letter reads (underlining in original):

One other matter I would like to inform you of is that the Peoria City Council is expected this month to consider whether to pursue a buyout of Illinois American Water’s Peoria District water system. An 1889 franchise agreement gives the City the right every five years to pursue a buyout of the water system. As you may recall, in 2005 residents of Peoria voted against a buyout by a margin of 82-18. At that time, an independent panel determined the purchase price would be $220 million in addition to new capital investments made by the company.

If the City Council decides to again pursue the takeover of the water system, the study alone may cost taxpayers $1 million or more. In addition, the company has made significant capital improvements since 2005, which have increased the value of the water system. Some buyout proponents suggest that the takeover of Illinois American Water’s business in Peoria will provide new revenue for City projects not related to the water system. That would be a mistake. Revenue from water bills should be used to operate and invest in the water system, as we do, rather than to fund other City projects. We have encouraged members of Council not to pursue a buyout because there is no reason to do so. A buyout process will be very long, costly and divisive while distracting the City and the company from more important priorities.

I could be wrong, but if I were a betting man, I’d bet that this time we’re going to hear the biggest push ever to buy the water company. Why? Three letters: CSO. The city really, really wants to find a way to pay for the Combined Sewer Overflow project without raising taxes. Being able to take water company revenues and put them toward that effort may prove too hard for the council to resist.

I’ve always been against the water buyout in the past, chiefly because I fear the city will use water rates to raise revenue for other things — essentially a hidden tax that could be used for questionable things like Gateway Buildings and subsidized parking decks. And that’s the argument the water company is making as well in this letter.

But on the other hand, it’s not like Illinois American Water is a non-profit cooperative, putting all their revenue back into the company. They make over $6 million a year in profit for their shareholders. Why shouldn’t the City make that profit and be able to use it toward, say, the CSO project? Or to get rid of the so-called garbage fee?

I’m starting to change my mind. It’s not that I don’t still have the same concerns about a potential water company buyout. It’s just that desperate times call for desperate measures. Buying the water company might be a way for the City to mitigate potential tax increases and still have the money to take care of the CSO project and other basic services.

2008 Campaign, The Peoria Chronicle

Welcome, Rotarians!

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Today, I had the privilege of speaking to the Peoria North Rotary. Matt Jones invited me to speak about the role of blogging in politics and public advocacy. This was the first time I had ever been to a Rotary meeting. I’ve always wondered what Rotary was all about; I’ve heard of it ever since I was a little kid and my grandfather would talk about being part of it.

So, to Matt and all the other Rotarians, thank you for having me; I had a very nice time and enjoyed meeting you.

And to the gentleman who asked me where Obama got his data for the assertion that “98% of small businesses make less than $250,000 a year,” it appears no one knows. But the New York Times thinks he may be correct:

According to figures compiled by the Small Business Administration, there are fewer than six million small businesses that actually have payrolls. The rest are so-called nonemployer firms that report income from hobbies or freelance work done by their registered owners, earning as little as $1,000 a year.

Of these, according to a calculation by the independent, non-partisan Tax Policy Center, fewer than 700,000 taxpayers would have to pay higher taxes under Mr. Obama’s plan. But even some of these are not small-business owners in the traditional sense; they include lawyers, accountants and investors in real estate, all of them with incomes that put them in the top tax brackets.

So are there “millions more like Joe the Plumber,” as Mr. McCain contended? Probably not. Mr. Obama may well have been correct when he stated that “98 percent of small businesses make less than $250,000.”

Meanwhile, those who use the Small Business Administration’s guidelines come to a different conclusion:

The US Small Business Administration (SBA) defines a “small business” according to its average annual receipts or the number of its employees. Here are examples from the SBA’s Table of Small Business Size Standards setting forth the maximum average annual receipts by industry that a business can have and still be classified as a small business:

Crop production of all types — $750,000
Animal production except for cattle & chicken/eggs — $750,000
Cattle feedlots — $2.5M
Chicken/egg production — $12.5M
Forestry & logging — $7M
Fishing — $4M
Irrigation, sewage, water supplies — $7M
Housing construction — $33.5M
Heavy and civil engineering construction — $33.5M
Dredging and cleanup — $20M
Concrete, framing, and other housing contractors — $14M
Car dealers — $23-29M
RV, motorcycle, & boat dealers — $7M
Furniture, hardware, clothing & sporting good stores — $7M
Electronic stores — $9M
Supermarkets, gas stations & department stores — $27M
Pharmacies — $7M

There are many more examples at the link. In addition, most of the industries in the Table […] are considered small businesses based on their total number of employees instead of average annual receipts. In those industries, the cut-off between small and large businesses ranges from 500-1,000 employees per business/industry.

It’s difficult for me to imagine a business that has 50 or more employees (let alone 500-1,000) that has receipts of less than $250,000 per year. And, given the SBA definitions of “small business,” it seems likely that many small businesses in a wide range of industries have receipts of more than $250,000 per year.

So, like I said, nobody knows, and Obama isn’t telling where he got his figures.