Property owners suing Blue Island over ‘outrageous’ water bills

Two Blue Island property owners are suing the south suburb over late fees for unpaid water bills they say were illegally designed to bring in more money.

One lawsuit was filed by a homeowner, the other by the owner of a condominium unit. Both say the south suburb’s practice of charging 10% compounding late fees a month on delinquent water bills isn't legal in Illinois. They say state law allows municipalities to get "reasonable compensation" for water and sewer services and that "a usurious, 10% monthly compounding 'late-fee' penalty or interest charge" doesn't meet that standard.

In Chicago, a penalty of 1.25% is added to late payments on water bills, but the fees aren't compounded.

Instead of shutting off the water after bills weren’t paid, Blue Island let the spigots run for years in an “outrageous, unlawful and usurious” scheme that led to shockingly high bills and water liens against the properties, according to the lawsuits filed in Cook County circuit court.

The suits say Blue Island collected an average of $238,037 in “water-penalty revenue” in 2018 and 2019 and that the figure had gone up to $2.4 million in 2023.

Michael Buchanan, who rented out a house in the 2200 block of 121st Street, says his tenant’s past-due balance of $884 in January 2020 ballooned to $172,469 in November 2023 because compounding 10% late fees had been applied each month for years.

The city removed some charges but still filed a lien against Buchanan’s property for $142,352.

Buchanan’s attorney Shorge Sato says the longtime tenant had been paying the water bills and when she got behind, the city tried to work out a payment plan but she couldn’t keep up with it, so the unpaid bills and penalties kept piling up.

Buchanan says he wishes the city had turned off the water right away rather than let the late fees stack up.

“Had they shut the water off, the tenant would have called me,” he says.

Condominium owner Robert Schoppen, who owns a unit at the Nassau Terrace Condominiums that he rents to a tenant, says in his lawsuit that the condo association was responsible for paying the water bill for all of the units. The total bill was $48,141 in January 2021, but, with late fees, that amount swelled to more than $1.8 million by February 2024, according to bills included with Schoppen's suit.

In a May 13 document included with the suit, the association's manager wrote: "The association owes the city of Blue Island approximately $1,980,863.00 for past-due water bills. 75% of this amount owed are past-due late fees. Management is in the process of negotiating with the city to get these late fees reduced."

Schoppen says he’d like to sell his unit, but the first buyer he found backed out because of the city’s lien.

“He wanted out of the deal immediately,” Schoppen says. “My ability to sell it is tremendously hindered because I’m forced to have this hanging over my head.”

Thomas Wogan, Blue Island's city administrator, says the billing setup is legal and the lawsuits were filed “by two landlords, neither of whom live in Blue Island, who collected rents from residents and then repeatedly failed to pay their water bill, resulting in large delinquent amounts on their account(s).”

Wogan says the current mayoral administration, which took office in May 2021, has been settling large water bills that had built up at commercial properties during the pandemic, which contributed to its larger water-penalty revenue last year.

He says there's been no change in the penalty structure, but it has updated its billing procedures “to ensure individual bills do not accumulate as they were allowed to in the past."

“We’ve hired additional staff to identify delinquent accounts as soon as they reach $250 or higher and to better communicate with the residents and, in the cases of rental properties, the owners as well,” he says.

Wogan says the Blue Island City Council voted to give the administration more flexibility to drop penalties and settle bills while avoiding shutoffs.

Stephen Hammer, who lives in the Forest View Mobile Home Park, sued Blue Island last year after the city threatened to cut off the entire park’s water for nonpayment. According to his lease, Hammer’s rent payments were supposed to include water, sewer and garbage fees, but the management company fell behind in its payments to the city. With the compounding late fees, the park's water bill last year hit $858,447.

Hammer argued in his suit that he was being unfairly harmed and won a temporary injunction barring a water shutoff last November. The two sides are close to reaching a settlement.

Hammer, a father of three, has described the situation as “nerve-wracking” and “terrible.”

His lawyer, Lawrence Wood, from the nonprofit agency Legal Action of Chicago, said, “I’d never heard of a water bill getting that high."