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Minutes - 10/24/2005 - Committee of the WholeMINUTES OF THE OCTOBER 24, 2005 COMMITTEE OF THE WHOLE MEETING OF THE PRESIDENT AND BOARD OF TRUSTEES OF THE VILLAGE OF OAK BROOK APPROVED AS AMENDED BY VILLAGE BOARD ON NOVEMBER 8, 2005. Village Clerk Gonnella announced that in the absence of President Quinlan that a motion should be made from the floor to appoint a Temporary Chairman for the Committee -of -the -Whole meeting. Motion by Trustee Aktipis, seconded by Trustee Kennedy, to appoint Trustee John Craig as the Temporary Chairman for the Committee -of -the -Whole meeting. VOICE VOTE: Motion carried. 1. CALL TO ORDER: The Committee of the Whole Meeting of the Village Board of Trustees was called to order by Chairman Craig in the Samuel E. Dean Board Room of the Butler Government Center at 7:35 p.m. Pledge of Allegiance was given. 2. ROLL CALL: Village Clerk Linda Gonnella called the roll with the following persons PRESENT: Trustees Stelios Aktipis, John W. Craig, Jeffrey J. Kennedy, Kathryn F. Manofsky, Robert G. Sanford and Asif Yusuf. ABSENT: President Kevin Quinlan. IN ATTENDANCE: Richard B. Boehm, Village Manager; Dale L. Durfey, Jr., Village Engineer; Darrell J. Langlois, Finance Director; Michael J. Meranda, Public Works Director and Baker Nimry, Zoning Board of Appeals. 3. WATER RATE STUDY Village Manager Boehm explained that the meeting is being held to discuss the findings of the Water Rate Study performed by the firm of Alvord, Burdick & Howson, L.L.C. He indicated that Mr. William Meinholz, Nora Bertram and Michael Won will give the presentation to the Board this evening. Ms. Bertram explained that the goal of the study was to maintain the status of the Water Fund as an Enterprise Fund. Water rates are used to fund expenses to support the water system. They determined the rates to fund daily operation and maintenance expenses as well as a significant long -term system improvement and replacement program. The last water rate increase occurred January 1, 2004. Their findings concluded that the water rates are currently adequate to fund the operation and maintenance of the water system. However to fund the capital improvement program that the Village would like COMMITTEE -OF- THE -WHOLE Minutes Page 1 of 7 October 24, 2005 3. to institute over the next several years, the water rate needs to be increased. The capital improvement program consists of several parts. The first segment is a significant water main replacement program. Much of the Village's infrastructure was installed before 1970 when cast iron was used almost exclusively for water mains. These water mains have a useful life of approximately 50 years and most are at or near their retirement age. The Village has proposed that 12,000 linear feet per year are,to be replaced at a total cost over a 30 -year period of approximately $107,000,000. Also included in the capital improvement program are replacement of water meters and meter transmission units, which are used in the monitoring of the meters. They need to be replaced every 15 years and need to be replaced twice in the next 30 years for an estimated cost of $4,800,000. The Village currently maintains two pump stations and two elevated tanks which requires maintenance every 25 years as one station was replaced in 2004 and one is scheduled for replacement in 2007. They will be replaced again toward the end of the 30 -year capital improvement program at a cost of $10,500,000. Elevated tanks need to be repainted every 10 years and they are scheduled for next year and again in the future. The firm also was asked to research additional storage. To properly serve existing customers, two existing 250,000 gallon storage tanks need to be replaced with two 750,000 gallon elevated storage tanks to maintain proper operation of the system including pressure and pump operation at an estimated cost of $4,000,000 tentatively scheduled for the year 2011. The Village is also considering performing significant commercial redevelopment in the business district. If this were to occur, the number of the users of the water system and the estimated usage will increase and it is feasible that a 4,000,000 gallon underground reservoir is to be constructed at a cost of $5,300,000 in the year 2010. From 2006 -2035 operation and maintenance costs increase with inflation and also with the DuPage Water Commission charges from $3,800,000 estimated for next year to $9,300,000 estimated for the year 2035. With a total operation and maintenance expense over the next 30 years of $175,000,000. Yearly water main replacements begin in the year 2016 and continue through the length of the project. The total capital cost expenses over the next 30 year is approximately $125,000,000 with a complete cost of the water system between now and 2035 of $300,100,000. If the Village proceeds with the commercial redevelopment program and institutes the 4,000,000 gallon underground reservoir in 2010, they can make a decision whether or not that will be paid for by using cash or revenue bonds. The estimated expenses increase to $130,000,000 and the operation increases also to $182,000,000 for a grand total of $3125000,000 over the 30 year project period. If the Village considers funding the 4,000,000 gallon underground storage reservoir constructed in 2010 using half revenue bonds and half cash, the revenue bonds are estimated to be issued for 20 years following the construction of the project at 5.5% interest. The estimated capital expense cost is $132,000,000 with a total cost of COMMITTEE -OF- THE -WHOLE Minutes Page 2 of 7 October 24, 2005 3. $314,000,000 over the 30 year project, period. If the Village considers funding the reservoir completely with bonding, the estimated cost with a 15 year option is $28,000,000. Operation and maintenance over 15 years from now until 2020 is $68,000,000 with a total cost of $97,000,000. However, over the 15 year period the bonds are not completely repaid as they will be repaid in 2029 and the water main improvement project will just begin in 2016. The Village has a Water Fund that had a balance of $5,500,000 in 1998 and since that time the balance has been decreasing even though water rates have been increasing. This shows that water rates are incapable of funding the daily operation and maintenance of the system, as the Village has had to use money from the Water Fund. Decreasing the Water Fund balance combined with the capital improvement projects slated for the next 30 years require an increase in water rates. The engineering firm considered a 15, 20 and 30 year project period. The firm recommends that only the 15 year project be considered at this time with continual re- evaluation every 3 to 5 years to insure that the water rates are keeping up with inflation and maintenance. The current water rate is $2.85 per 1,000 gallons of water with a $14.00 bi- monthly service charge. The firm recommended 4 different types of options. Option IA, the minimum storage option, considers no significant commercial redevelopment and strictly the original capital improvements in which the starting rate. for 2006 would need to increase to $3.18 in January to adequately fund the water system improvements and expense. Option 1 B includes maximum storage with the 4,000,000 underground storage reservoir being funded with cash requires an increase of the water rate to $3.61 per 1,000 gallons to fund those projects, operation and maintenance. Option 1C is maximum storage construction funded using 50% revenue bonds therefore; the water rate required would be lower at $3.38 per 1,000 gallons. Option 1D includes maximum storage of the 4,000,000 gallon underground storage reservoir funded using 100% revenue bonds with principal and interest payment following 20 years and the water rate required is $3.25 per 1,000 gallons. They estimate water rates are to be increased by 3 to 4% per year to keep up with inflation and escalating capital improvement costs. If commercial redevelopment does occur, the firm estimated that there would be a 1% increase in usage growth from 2010 through 2019. The engineering firm did a survey of DuPage Water Commission customers and determined that Oak Brook is currently in the bottom quarter of customers with their present water rates. Village Engineer Durfey explained that water connection fees are different from other communities. Some communities may have tripled the amount as their fees may include capital improvements. Finance Director Langlois also indicated that some water rates from other communities may include sewer charges. Naperville bills electric, water and sewer all together. Trustee Sanford indicated that the proposal suggests tripling the capacity of tanks including an underground reservoir and asked why that should occur with only a 1% COMMITTEE -OF- THE -WHOLE Minutes Page 3 of 7 October 24, 2005 3. increase in population with possible commercial redevelopment. Public Works Director Meranda explained that when this water rate study was proposed, it was to include every capital improvement that is needed. Presently, there are two elevated storage tanks but they are considered pressure tanks as they give the adequate height needed to give pressure for the water faucets. These tanks are normally half full of water, as they are figured into calculated storage but not useful storage. When the water level is high the pumps are off, when the water is level is low they are turned on especially during the summer months. These tanks are so small that during the summer months the level drops so dramatically from over water usage by our Village residents. These water surges in the pressure creates water main breaks. More flexibility is needed with an underground storage for useful storage for safety purposes such as a fire. Another study may be necessary to determine if two 500,000- gallon storage tanks are needed rather than 750,000 storage tanks. He indicated that this past summer it was extremely critical with operational issues to maintain water level pressure 24/7. He noted that 42% of our customers do not reside in Oak Brook. This last summer the Village had a deficit of 1,200,000 gallons a day due to high water usage as DuPage Water Commission contractually only allows Oak Brook 6,800,000 gallons a day. Trustee Sanford asked if the Village could sell sections of our water system to other municipalities that use our water system, would this alleviate the problems with the capital improvements. Ms. Bertram indicated that it was considered to sell the customers who reside in or around Elmhurst, Oakbrook Terrace and Hillside. Hillside Westdale Gardens was not feasible as the water mains are in such poor condition and need to be replaced in the next two years. The firm could not determine what the price would be to sell to the other communities so they strictly looked at giving them away. This would be losing the customer base and not having to do those improvements in that neighborhood. Then they assumed that the 4,000,000 gallon underground storage tank was not required. An analysis based on this showed that it would not be beneficial to the Village to give the customers away. Considering the timing of a sale and pending a sale price might be something the Village would want to consider in the future. She indicated that the Village could sell the water mains for the Brandywine system to Oakbrook Terrace. Over the 30 year period capital improvements are still necessary, as a significant amount of revenue would be needed when 42% of your customer base would be gone if you sold the water mains to your customers or gave them away. Trustee Aktipis inserted skepticism that a lot of the capital improvements that are being considered to be funded so that the Village can continue in the future to provide service to as many residents as the Village does today is because of the Village's limited capacity and ability to store water appropriately to be available on a larger scale rather than if the Village just services Oak Brook. COMMITTEE -OF- THE -WHOLE Minutes Page 4 of 7 October 24, 2005 3. Public Works Director Meranda explained that there are two ground reservoirs that provide 7,500,000 gallons of water. Trustee Aktipis commented that with the suggested 4,000,000 gallon reservoir it would increase the Village's ground storage by 60% and a 300% increase in elevated storage to serve over the next 30 years. It appears to Trustee Aktipis that the Village is over - engineering with only a 15% increase in population. Public Works Director Meranda responded that he disagrees in an operational perspective, as the Village in July during a 12 day period pumped over 8,000,000 gallons. The DuPage Water Commission allowed the Village and other communities to take water more than the 1.7 allocated rate after midnight but they are not contractually obligated to do this. More importantly, as the DuPage Water Commission reaches their capacity they will not be able to do it and they can close the excess water allocation off to Oak Brook. He cannot determine if the 4,000,000 gallons is necessary at this time but some figure should be determined for the future. Trustee Kennedy asked if the new non -home rule sales tax could be used for these types of capital improvements. Finance Director Langlois agreed that it could be used. Trustee Kennedy concurred with the hypothesis of the study that the Water Fund is an Enterprise operation. It is a utility and a business that should be self - sustaining including the water charges to cover capital improvements and operation. Oak Brook is a maturing community and the water mains need to be replaced. The main replacements, pump stations, water meters and care of elevated tanks are necessary. His focus is how much additional capacity is necessary as the Village has 8,000,000 gallons now. The study suggests increasing to 13,000,000 which is a 60% increase and is it necessary. The engineering firm and Public Works Director Meranda have made a strong argument that the elevated tank increase is necessary. If additional capacity is necessary, how much is needed and what is the best way to obtain it. The consideration now is to replace two elevated tanks with two new 750,000 tanks with a 4,000,000 underground storage reservoir. He asked if that is the most efficient method to get the capacity increase that is needed. He would like to have an engineering study that indicates the capacity increase necessary and the best methods to provide this. He believes that Option IA is unrealistic and irresponsible of the Village to think that there isn't any usage growth. He recommends that the system pays for itself, but that some water main replacements as part of the commercial revitalization project could be funded by the Infrastructure Fund funded by the non -home rule sales tax. Trustee Aktipis suggested conducting an additional study to determine if it is in the best interest of the Village to provide water service outside the Village limits. If the needs for such expensive additions to our system in terms of storage, operations, additional distribution of water and water main replacements that drives the increased cost of operation is necessary or it might be beneficial to limit the water service area. This will allow additional capacity to use for the Village as the population increases. Director Meranda responded that although 42% of the water customers are outside Oak COMMITTEE -OF- THE -WHOLE Minutes Page 5 of 7 October 24, 2005 3. Brook they do not use hardly any water but revenue is received from them. Trustee Yusuf asked what the revenues are outside of Oak Brook by our water customers. Finance Director Langlois estimated approximately $325,000 or approximately 20% of the revenue received. Trustee Yusuf asked if there was the possibility of increasing the water rates but using some of the General Fund revenues to mitigate the increase to some of our residential customers. Finance Director Langlois suggested that if there were surpluses in the Infrastructure Fund, they could be utilized to subsidize part of this. The capital share per residents would be the more likely one that could be done. Manager Boehm stated this has never been done but possibly could be done. The Village has held discussions with other communities to sell portions of our water system with one community interested. Another community is only interested in the commercial portion of their community. The Village could mitigate some of the Village's expenditures and water demand but also revenue would decrease and still stabilize a rate for the greater area of Oak Brook. Manager Boehm indicated that the operational needs of today should be considered now for increased storage to meet the high demands that are made during the summer months. Trustee Sanford asked what option would be safe. Director Meranda suggested the minimum storage option be considered, re- adjust the budget and have an in -depth study to ensure that a rate increase is necessary. Trustee Kennedy recommended an analysis of an engineering study of what is necessary of expanded water storage capacity, what are the best combinations of factors to obtain this and what are the economic implications of selling off portions of the water distribution system that serves outside Oak Brook and would communities be willing to pay for this. He asked for another option of the feasibility of an underground tank being 100% financed by bonding for 20 to 30 years. Finance Director Langlois explained prior to this study, the method by which water rates were set was in the Five Year Plan process. The Five Year Plan process did call for a $0.25 (or 8.7 %) increase in 2006. A decision of the water rate could be deferred for 2006 but next year is a fairly heavy capital improvements year. If a rate increase is deferred much longer, it could impact the amount of reserves that are in the Water Fund for next year. 4. ADJOURNMENT: Motion by Trustee Aktipis, seconded by Trustee Kennedy, to adjourn the Committee -of- the -Whole Meeting at 8:47 p.m. VOICE VOTE: Motion carried. COMMITTEE -OF- THE -WHOLE Minutes Page 6 of 7 October 24, 2005 9 ATTEST: Linda K. Gonnella, CMC���� Village Clerk � I, al- COMMITTEE -OF- THE -WHOLE Minutes Page 7 of 7 October 24, 2005