Suit claims Fox Lake misappropriated $2.2 million in sewer fees

Fox Lake is being sued by two neighboring suburbs and a regional sewer taxing district alleging the village misappropriated $2.2 million earmarked to treat sewage at its Northwest Regional Water Reclamation Facility.

The lawsuit filed by the Lakes Region Sanitary District claims the fees it sent to Fox Lake to treat sewage was instead used to inflate the village's general fund from 2011 to 2015.

Kurt Stimpson, president of the Lakes Region Sanitary District, said that's a violation of the district's contract with Fox Lake.

"The residents of the communities that we represent rely on us to assure that their money is spent properly," Stimpson said. "Our customers should know that when they pay their sewer bills, the money is being used for its intended purpose - treating wastewater and protecting our environment."

The district serves 22,000 residents in northwest Lake County, including Fox Lake, Round Lake, Round Lake Beach, Round Lake Park, Round Lake Heights, Hainesville, Lake Villa, and some unincorporated areas.

The villages of Round Lake and Round Lake Heights have joined Lakes Region on the lawsuit. Lake County also is named a defendant because it is responsible for auditing Fox Lake's use of the sewer money, court documents state.

Lake County Administrator Barry Burton and Fox Lake Mayor Donny Schmit, who has served as mayor since 2013, each declined to comment on the pending litigation.

The village owns and operates the Northwest Regional Water Reclamation Facility, which treats 9 million gallons of wastewater a day from 90,000 residents in its service area.

Stimpson said Lakes Region collects service fees from its residents, then sends the funds to Lake County, which in turn sends the money to Fox Lake to operate the treatment facility.

The suit alleges Fox Lake improperly transferred that money to the village's general fund and then used it for municipal services, not for operating the wastewater facility as required by contract.

The suit seeks recovery of the funds, as well as an independent audit to confirm the precise amount of the money used erroneously by Fox Lake.

Stimpson said Lake County authorities were told about the problem two years ago, and county officials negotiated an agreement with Fox Lake to repay the funds.

However, the lawsuit claims, the settlement underestimated the money involved, allowing Fox Lake to repay only $846,000 of the $2.2 million owed over 10 years, and did not charge interest for the money misappropriated.

"It is unfortunate that we have been forced to bring this lawsuit," Stimpson said. "We hope that this misuse of public funds and trust will be resolved quickly."

Sewer: Lawsuit argues Fox Lake didn't pay enough money back