G-843 - 10/23/2007 - WATER CHARGES - Ordinances Supporting Documents�J
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AGENDA ITEM
Regular Board of Trustees Meeting
of
October 23, 2007
SUBJECT: Water Rate Adjustment
FROM: Darrell Langlois
BUDGET SOURCE/BUDGET IMPACT: Impacts Water Fund Revenue
RECOMMENDED MOTION: I move that the Village Board approve Ordinance 2007 -
WA -G -843, which decreases the consumption charge for water from $3.25 per thousand
gallons to $3.15 per thousand gallons effective November, 2007
Background/History:
At the Village Board meeting on October 9, 2007, the Board discussed various options related to
water rates. The consensus of the Board was to implement Option 2, which lowers the
consumption charge for water from $3.25 per 1,000 gallons to $3.15 per 1,000 gallons, which is
a decrease of approximately 3% from the current rate. The new rate will be implemented for all
water used after November 1, 2007 and will be reflected on the January bill for residential
customers and the December bill for all commercial customers.
Recommendation:
I recommend approval of the attached ordinance
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AGENDA ITEM
Regular Board of Trustees Meeting
of
October 9, 2007
SUBJECT: Water Rate Review e
FROM: Michael Meranda, Director of Public Works 61
Darrell Langlois, Finance Director i�a4---
ITEM 10,11 ,
4F O�A!Hl'B'� O I H1
BUDGET SOURCE/BUDGET IMPACT: Impacts Water Fund Revenue
RECOMMENDED MOTION: I move to direct staff to prepare the necessary ordinance to
reduce the Village's water rate from $3.25 per 1,000 gallons to $3.15 per 1,000 gallons for
all consumption after October 31, 2007 based on Option 2 as presented.
Background/History:
In 2005 the Village hired the firm of Alvord, Burdick & Howson, LLC to conduct a
comprehensive water rate study for the Village's water system The purpose of the study was to
come up with a rate program that would provide for system improvements over the next five
years, provide for storage enhancements (some of this would be bonded for), and to begin setting
aside funds for the eventual replacement of older water main segments. As a result of this study,
effective January 1, 2006 the Village's water rate was increased from $2.85 to $3.25 per 1,000
gallons. Future increases of 3% annually were required in order to finance the operating and
capital improvement program through 2020
Subsequent to approving this study several material events have taken place that warrant taking
another look at water rates. These items include:
• A reduction from $1.45 to $1.25 in the target wholesale rate for water purchased from the
DuPage Water Commission (DWC).
• Receipt of a rebate payment of $1,927,342 from DWC due to a revision in their reserve
policies
• An increase in revenue of $350,000 due to an agreement in principal to sell the portion of
the water system located in unincorporated Elmhurst to the City of Elmhurst.
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• A reduction in revenue net of water supply costs of approximately $90,000 per year due
to the sales transaction to Elmhurst. This loss of revenue is more than offset by
elimination of $6 1 million in water main replacement costs scheduled for 2017 -2019
The Elmhurst mains being sold were the first ones scheduled for replacement.
• The Village Board elected to hold water rates at the rate of $3.25 per 1,000 for 2007
when an increase to $3 36 was included in the 2005 study.
• A review of the road program indicates major road work in Timber Trails in 2016. Thus,
especially with the elimination of the Elmhurst mains, it makes sense to move the Timber
Trails water main replacement from 2018 -2019 up to 2016 when the road work takes
place. This moves $5.3 million of costs up several years.
• The Village is moving forward with improvements to three separate water main segments
totaling approximately $1.3 million as part of the I- 88/22nd Street bridge project. None of
these improvement were included in the 2005 rate study
Taking into account all of these factors, staff has forecasted water rates under four options in
order to meet revenue requirements of the system as well as providing for the capital
improvements contemplated in the 2005 study. While it is impossible to exactly duplicate the
2005 study, our projections were done with a goal of achieving an ending cash position in 2020
that was materially close to that projected in the 2005 study. The attached table shows a rate
comparison under each of four options, which are described as follows:
• Under Option 1 the water rate is reduced to $3.05 in 2008 in order to fully pass along the
$0.20 reduction in the wholesale rate by DWC and rates increase by 3% each year in
accordance with the 2005 study. The downside with this option is that it actually deviates
by $0.42 from the rate study as the 2008 rate projected was $3.47. This difference
reduces the ending cash position by approximately $300,000 below the six month reserve
requirement for the 2020 projection period. Furthermore, there would be a negative cash
balance in 2016 due to advancing the Timber Trails water main replacements Proper
perspective should be given to these issues since the planning period is so long (15 years)
and there will be so many other variances that these problems may never in fact
materialize. Nevertheless, a 2008 rate that is $0 42 below what was originally called for
in the 2005 study does not provide the Village with much "cushion" should new costs
develop or should the current or future Board deviate from the increases called for
• Under Option 2 the water rate is reduced to $3.15, which is a reduction of $0.10 from the
current rate and $0.32 below the rate called for in the 2005 study; each year thereafter
rates would increase by 3 %. The advantage of this option is that it fixes the cash flow
problem in 2016 encountered under Option 1, and in 2020 the ending cash position is
$2.5 million greater than Option 1. This is significant since at that time capital funding
will be an issue since water main work averaging $4 6 million per year is expected in
2021 -2025.
• Under Option 3 the water rate is reduced to $2.95, which is $0.30 below the current rate
and $0.52 below the 2008 rate called for in the prior study; the rate increases 4% per year
thereafter. The theory here is that if the Board is willing to live with higher increases
later the rate can be reduced further today. In this option there is a minor cash flow
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problem in 2016 once again due to the Timber Trails mains but in 2020 the ending cash
position is very similar to Option 2. The danger in this scenario is that once the rate is
lowered the Board may be reluctant to adopt the increases scheduled later, which could
put the entire capital program in jeopardy or require significant borrowing.
• Under Option 4, the Village would hold the existing water rate at $3 25 for an additional
two years, which would be a reduction of $0 22 for 2008 and $0 32 for 2009 from the
rates called for in the 2005 study; thereafter rates would increase by 5% every other year
The advantage of this option is the elimination of the need to increase rates each year,
which is obviously unpopular. There are no cash flow issues in 2016 as in some of the
other options, and the ending cash position in 2020 is similar to that in Options 2 and 3.
In order to provide the Village Board with additional information regarding water rates I have
attached two exhibits. Exhibit 1 is a table prepare by Village staff that compares the water rate
by year for each of the options presented. Whenever changes in water rates are considered, an
obvious question is how our rates compare with other communities. Exhibit 2 is a two page
survey that is prepared annually by the Village of Lombard and compares total water and sewer
billing for many nearby communities. For a small user (7,000 gallons bi- monthly), the total
billing for an Oak Brook water customer currently would rank 24th out of 35. For larger users
(the survey assumed 20,000 gallons bi- monthly, much more typical for an Oak Brook residential
customer), the total billing for an Oak Brook water customer currently would rank 29th out of 35
Taking into account that several of the communities on the survey are not in the DuPage Water
Commission and do not have the cost of purchasing water, the current Oak Brook water rate is
well below average, and for typical Oak Brook residential customers the comparative rate is near
the bottom. As three of the four options include a reduction in rates, this would make Oak
brook's rates even more competitive.
There are obviously many other rate making scenarios the Board can consider, which staff would
be happy to prepare if so directed If one of these options is selected staff will prepared the
necessary ordinance for the Board's consideration
Recommendation:
Based on all factors, staff would recommend that the Board direct implementation of the
water rate program indicated under Option 2, which will lower the Village's water rate
from $3.25 per 1,000 gallons to $3.15 per 1,000 gallons effective for all consumption after
October 31, 2007 and provide for annual increases of 3% thereafter.
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Village of Oak Brook
Comparative Water Rate Options
2005
Study Actual Option 1 Option 2 Option 3 Option 4
2006
325 325
2007
336 325
2008
3.47
305
315
295
325
2009
358
314
324
307
325
2010
3.70
3.24
334
3 19
341
2011
382
333
344
332
341
2012
395
343
355
345
358
2013
408
354
365
359
358
2014
4.21
364
3.76
3.73
376
2015
435
375
3.87
388
376
2016
449
386
399
404
395
2017
4.64
3.98
411
420
395
2018
480
410
423
437
415
2019
496
422
436
454
415
2020
512
435
449
472
436
Increase Assumption 3% annual 3% annual 3% annual 4% annual 5% Every 2 Years
Information based on a single family home using 7,000 gallons in a bi- monthly period
MUNICIPALITY
WATER
SEWER SAND IST
MISC
TOTAL
COMMENTS
Hanover Park
Wood Dale*
Glen Ellyn
$5054
$2863
$3444
$2926
$3877
$2737
$325
$400
$7980
$7065
$6581
Minimum water charge of $50 54 (14 tgal)
$1 25 Water & $2 00 Sewer Fixed Costs
Sewer Repair $2 00 /month
Lombard
$29.54
$2786
$6,40
$6380
Customer Service Charge
Clarendon Hills
$3472
$1050
$1500
$6022
$7 50 Fixed Charge /Flagg Creek Sanitary
Winfield
$3269
$2268
$5537
Minimum of $39 55
Barrington*
$1463
$2751
$1269
$5483
W &S Base Charges
Oakbrook Terrace
$4025
$1430
$5455
Flagg Creek Water Reclamation District
Schaumburg
$2793
$567
$2062
$5422
Water Sery Charge (5 22) & Sewer Fee (15 4
Villa Park*
$2765
$1001
$1435
$1 50
$5351
Salt Creek Sanitary District
Aurora*
$31 92
$1400
$690
$5282
Bill in Cubic Ft - Drainage Fee
Addison
$25 4't
$2604
$1 00
$5245
$1 00 User Fee per 2 -Month Bill + 2 tgal min
Bensenville*
$28 70
$1960
$375
$5205
Fixed Fee
Elmhurst
$2702
$2464
$51 66
Min Charges - Water -$3 06 /Sewer -$2 79
Glendale Hts
$2233
$1694
$1200
$51 27
Sewer Debt Charge
Naperville
$1890
$1029
$2080
$4999
$2 5 meter fee & 7 9 wastewater fee /month
Willowbrook
$2793
$13 86
$798
$4977
Minimum Bill is $35 91 (9 tgal) +5% utility tax
Woodridge
$21 35
$245
$1386
$11 96
$4962
Service Charge & 5% Utility Tax
Wheaton
$21 98
$1029
$1386
$328
$4941
Stormwater Fee of $ 4679 per 1,000 gals
Bloomingdale
$2352
$2478
$4830
Minimum 5,000 gal charges
Bartlett
$2912
$903
$723
$4538
DuPage County Sewer Charge
Hillside
$42 00
$315
$4515
Min of $6 45
Itasca*
$2765
$1400
$260
$4425
.OM Fee (Varies depending on Line Size)
Oak Brook
$22 75"
$1430
$700
$4405
$7 00 Customer Charge
St Charles*
$1050
$21 00
$11 63
$4313
Minimum charges
Hinsdale
$2534
$1430
$3964
5% utility tax on bills /Flagg Creek Sanitary
Downers Grove
$2532
$1430
$3962
$5 44 minimum charge of 2 units (1500 gals)
Lisle
$2030
$460
$1386
$3876
Sewer Maint Fee /Min of 6,000 gal usage
Carol Stream
$21 35
$1680
$3815
Darien*
$2695
$1045
$3740
$4 50 minimum Sewer Charge
Westmont
$2400
$980
$3380
Downers Grove Sanitary Customers
Arlington Heights*
$2576
$224
$520
$3320
$5 20 Charge for Residential Meters
North Riverside
$2401
$2401
6 tgal minimum
Warrenville*
$840
$1200
$2040
Minimum Base Rates -W =$8 00 &S =$12 00
Harwood Heights*
$1715
$125
$1840
Minimum bill is $18 40
AVERAGE COST
$4758
*Did not respond to 2007 Survey
2007 Water Sewer Municipal Rate Comparison As Revised 3/28/2007
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Information based on a single family home using 20,000 gallons for a bi- monthly bill
MUNICIPALITY WATER SEWER SAN DIST MISC TOTAL COMMENTS
Glen Ellyn
$98 4q
$7820
$400
$18060
Sewer Repair $2 00 /month
Lombard
$84.4@
$7960
$6.40
$170,40
Customer Charge
Wood Dale*
$81 80
$7543
$325
$16048
$1 25 Water & $2 00 Sewer Fixed Costs
Winfield
$9346
$6480
$15820
Minimum of $39 55
Hanover Park
$7220
$8360
$15580
Villa Park*
$7900
$2860
$41 00
$1 50
$15010
Salt Creek Sanitary District
Addison
$7260
$7440
$1 00
$14800
$1 00 User Fee per 2 -Month Bill
Elmhurst
$7720
$7040
$14760
Oakbrook Terrace
$11500
$2990
$14490
Flagg Creek Water Reclamation
Bensenville*
$8200
$5600
$375
$141 75
$3 75 Fixed Monthly Fee
Wheaton
$6280
$2940
$3960
$936
$141 16
Stormwater Fee of $ 4679 per 1,000
Clarendon Hills
$9920
$2400
$1500
$13820
$7 50 Fixed Customer Charge /month
Aurora*
$91 20
$4000
$690
$13810
Bill in Cubic Ft - Drainage Fee
Bloomingdale
$6720
$7080
$13800
Commercial Rates are Different
Barrington*
$41 80
$7860
$1269
$13309
Fixed Fees
Hillside
$12000
$900
$12900
Minimum of $6 45 /month
Glendale Hts
$6380
$4840
$1200
$12420
Sewer Debt Charge
Woodridge
$61 00
$700
$3960
$1570
$12330
Service Charge & 5% Utility Tax
Itasca*
$7900
$4000
$260
$121 60
OM Fee (Varies depending on Line Size)
Willowbrook
$7980
$3960
$11940
DuPage County Sanitary
Schaumburg
$7980
$1620
$2062
$11662
Water Sery Charge (5 22) + Flat Sewer (15 40,
Bartlett
$8320
$3303
$11623
Base Sewer Charge of $7 23
Carol Stream
$61 00
$4800
$10900
Naperville
$5400
$2940
$2080
$10420
$2 50 meter fee /$7 9 wastewater per mo
Westmont
$8000
$2400
$10400
Flagg Creek Water Reclamation
Hinsdale
$7246
$2990
$10230
5% utility tax on bills /Flagg Creek Sanitary
Downers Grove
$7235
$2990
$10225
Flagg Creek Sanitary District
Lisle
$5800
$460
$3960
$10220
Sewer Maintenance Fee - Bi- monthly
Oak Brook
$6500—
$2990
$700
$101 90
$7 00 Customer Charge
St Charles*
$3000
$6000
$11 63
$101 63
Minimum charges
Danen*
$7700
$21 50
$9850
$4 50 minimum Sewer Charge
Arlington Heights*
$7360
$640
$520
$8520
Residential Meter Service Charge
North Riverside
$6860
$6860
Minimum 6,000 gallon bill
Warrenville*
$2400
$31 20
$5520
Base Minimum Charges
Harwood Heights*
$4900
$1 25
$5025
AVERAGE COST
$12234
2007 Water & Sewer Municipal Rate Comparison As Page 1