The Northwest Regional Water Reclamation facility in Fox Lake was the object of a civil suit over funds drawn by the village for its operation. Management issues have raised question since the 1990s. (Photo by Gregory Hatutunian/for Chronicle Media)

The dismissal of a civil lawsuit, filed by the Lakes Region Sanitary District, has resulted in the resignation of its board president in a May 30 statement to district officials and personnel, the Lake County Board, as well as village mayors within the district’s jurisdiction.

The statement that Kurt Stimpson had stepped down came during that evening’s board session. Former Fox Lake Trustee Kevin Hunter was appointed to replace him.

The litigation involving the district against the Village of Fox Lake, and Lake County, sought to recover $2.2 million in alleged excess money taken from a regional fund by Fox Lake for maintenance and operation of the Northwest Regional Water Treatment Facility. The allegations stated the funds were used to bolster line items in the village’s budget and were misappropriated.

In his May 18 determination, Lake County Circuit Court Judge Mitchell Hoffman dismissed the case against the county and the village with prejudice, meaning the matter is barred from further action on the same claim. He cited that the particular of unjust enrichment by the village could not be substantiated, and that a settlement agreement and “dispute resolution” with the county was “reasonably exercised and concluded.”

Stimpson’s statement said, in part, “As a result of Judge Hoffman’s ruling … I am resigning from my position … based on the ruling, neither the district nor our affiliates — Utilities, Inc., the villages of Hainesville, Round Lake, Round Lake Beach, Round Lake Heights, Round Lake Park, or Lake Villa have any authority to represent the interests of our constituents.

“The county and Fox Lake only have a ‘say’ in the operation of the regional system, and our constituents have no voice in the manner in which the system is operated or the fees that they will be charged going forward. I cannot ethically participate in a governmental system where tax- and fee-paying constituents have no representation.”

At issue is Fox Lake having an agreement in place to treat effluent water at the plant, from the county’s northwest regions, and gathers funds out of the Northwest Regional Fund as compensation for the facility’s management. Communities within the sanitary district’s

jurisdiction contribute to the fund. County-owned interceptor sewers convey the effluent water to the treatment plant, and the monetary disbursements from the fund to Fox Lake, for operational and administrative costs, are overseen by the county.

Lake County and the Village of Fox Lake had issued a joint press release last Jan. 26 concerning a proposed mediation settlement on fees charged by the village. The release stated, “During an accounting review, the county questioned approximately $1.2 million of funds charged as an indirect cost, from the Northwest Regional Fund to the Village’s General Fund, from 2011-15.” An audit had uncovered no improprieties other than police and fire services charged to the fund.

The village used an indirect cost methodology, and all monies for the fund were destined for maintenance, operational costs, and expenditures benefitting the treatment plant. The period questioned was 2011-15, during the mayoral administration of Ed Bender. Legislation, by the state of Illinois also allowed a flat fee of 10 percent assessment, as opposed to actual costs, and was not initiated.

“We have a contract with Fox Lake, and each of the municipalities, to collect sewage through interceptors, they pay us and we pay Fox Lake through the regional fund, which is separate from the general fund,” said Lake County Administrator Barry Burton. “They recoup the cost for running the plant such as payroll, maintenance … each year. It was all audited by our finance department, and in 2011, they took more costs than was associated with it.

“We (the county) initiated mediation to pay the money back. They agreed to pay $1.2 million that was not authorized based on our audit of their books. We gave them credit for $400,000 in costs that could have been assessed, resulting in a timeline of 10 years to repay $840,000. We found out customers were not being charged for this action.”

Ordinances for water and sewer rate charges, from March 1986 under former Mayor William Dam, were obtained by the Chronicle. It established rates for general, commercial, and wholesale customers as $75.63 as a minimum charge, to $90.69 in October 1990. Billing was changed from a three-month cycle to a two-month cycle during the James Pappas administration. By 2002, under former Mayor Nancy Koske, the water rates had risen to $41.79 for water alone, and in-area increments of nearly a $4 increase by 2005.

“They (Fox Lake) voluntarily agreed to pay back the money, but I believe the lawsuit was driven by one individual at the sanitary district,” said Burton. “He made up the $2.2 million amount, and we have seen no verification indicating that … our auditor went through the financial records and they owed $1.2 million. They are paying every dime owed.” Burton also said interest is being added, although it is a negligible amount.

Requests for comment by Stimpson were not returned. Fox Lake Village Administrator Anne Marrin deferred comment for this article to Mayor Donnie Schmit. Schmit did not return calls.

“We have no comment on the lawsuit, and the decision,” said Mohammed Haque, the district’s superintendent. “We have no comment on the resignation of Mr. (Kurt) Stimpson. The district board named a member, Kevin Hunter, to fill the position.”

— Lakes Sanitary Board Chief Quits Over Lawsuit Dismissal–