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Alternative Water Supplier

In July, 2018 the Village entered into a water supply agreement with the City of Evanston. Since then, the Village has been working to design and construct the necessary infrastructure to connect the two potable water systems. The search for an alternative water supplier was in response to the City of Chicago’s drastic increase in water rates. Between 2008 and 2017, Chicago increased water rates by $2.35 per 1,000 gallons from $1.53 to $3.88, which constituted a 154% increase. In order to keep up with the increased wholesale costs, the Village needed to pass on those rate increases to customers, so there was a desire to control wholesale water costs going forward by identifying an alternative supplier and entering into an agreement with an established methodology for setting and increasing the rate.

Construction updates will be posted to the Infrastructure Projects page of the website on a regular basis throughout construction. Additionally, anyone interested in receiving regular e-mails with construction updates can sign up here

Below is a timeline of events leading up to the design and construction of the transmission main.

Timeline of Events

2012

The Village participated in a water transmission main study with the Village of Niles, the Cities of Evanston, Des Plaines and Park Ridge, the Northwest Water Commission (comprised of the Villages of Arlington Heights, Buffalo Grove and Wheeling, and the City of Palatine), and the Northwest Suburban Municipal Joint Action Water Agency (made up of the Villages of Mount Prospect, Schaumburg, Hoffman Estates, Elk Grove, Rolling Meadows, Hanover Park, and Streamwood). The purpose of the study was to evaluate potential routes from Evanston’s water transmission plant to various new wholesale customers. Possible routes included Golf Road, Oakton Street, and Touhy Avenue. The study ultimately concluded that a water transmission main would not be feasible along Touhy Avenue since a portion would need to be installed within the City of Chicago’s limits. Due to the Village’s proximity to Evanston, staff began working with Evanston to evaluate making a connection with their south water tower located at the intersection of Hartrey Avenue and Cleveland Street (just north of Oakton Street). At the conclusion of the study, most of the communities determined that the capital costs were too high to continue moving forward.

2014

Evanston revisited their 2012 transmission main study and included the Villages of Lincolnwood, Niles, Morton Grove and Glenview, and the City of Park Ridge. Ultimately, Glenview removed themselves from the study and in early 2015, the Village met with the remaining three communities to discuss the possibility of taking part in negotiations with Evanston for water service. The conclusion of the updated study found that the Village was best served with a direct connection to Evanston further south than the points of connection being considered by the other three communities, due to the Village’s proximity to Evanston. Park Ridge ultimately removed themselves from the discussion and in late 2016, Niles and Morton Grove entered into a water supply agreement with Evanston.

2015

The Village entered into a study with the Villages of Skokie and Wilmette to discuss the possibility of purchasing water from Wilmette, who has their own water plant drawing from Lake Michigan. The evaluation determined that it would cost between $86 million and $100 million to make the necessary water plant and system improvements for Wilmette to sell water to the two communities. Based on the high capital cost, a connection to Wilmette was abandoned.

2016

The Village of Skokie completed an update to their water model and conducted an evaluation of selling water supplied by Evanston to the Village by “wheeling” through the Skokie system. The value of pursuing this option is that there would be a lower amount of capital outlay required by the Village since the transmission main could be connected at the Village’s border with Skokie. However, Skokie determined that there would be significant improvements necessary to their system, which they would only undergo if Niles and Morton Grove purchased Evanston water through the Skokie system rather than connecting direction to Evanston. In December, 2016 Niles and Morton Grove elected to purchase water directly from Evanston, making this option unavailable.

2017

Throughout late 2016 into 2017, the Village worked with Evanston to negotiate a water supply agreement. In April, 2017 the framework of such an agreement was presented to the Village Board for consideration. The Village Board largely approved of the agreement, but desired to have alternative connection points evaluated to minimize the rate. In August, 2017 staff reported to the Village Board that Evanston agreed to reevaluate the number of water mains included in their water rate, thereby reducing the initial proposed rate by $0.90 per 1,000 gallons. The Village Board directed staff to complete negotiation of a water supply agreement and begin the process of conducting a route study. On September 5, 2017 the Village entered into an agreement with Christopher B. Burke Engineering, Ltd (CBBEL) to conduct a route study.

2018

In June, 2018 the Village Board reviewed the route study conducted by CBBEL. The evaluated routes connect the Village’s water pumping station to the Evanston water system just east of the North Shore Channel at Oakton Street. Three routes were evaluated, that included generally along McCormick Boulevard, Hamlin Avenue, and East Prairie Road. Due to the long term costs of each route, Hamlin Avenue was ultimately selected as the preferred route. In July, 2018 the Village entered into an agreement with CBBEL to perform a detailed design of the new transmission main and entered into a 39 year water supply agreement with Evanston.

Water Supply Costs

The water supply agreement with Evanston is different from previous agreements with Chicago in that the method by which the wholesale water rate is established is clearly defined. Chicago simply charges the same rate to all of its customers and has the sole authority to change it, which is why it was able to increase rates by over 150% in ten years. The Evanston rate is based on the American Water Works Association’s (AWWA) manual on establishing water rates and is made up by three components, Operations and Maintenance, Depreciation, and Return on Rate. 

Category

Description

Portion of Rate 

O&M

Includes all costs associated with operating and maintaining the Evanston system. Costs are broken out proportionally based on actual usage.

28%

Depreciation

Includes depreciation of assets such as the water transmission plant, four Evanston transmission mains impacted by Lincolnwood’s use, and the transmission main dedicated to Lincolnwood. Shared infrastructure is divided proportionally by IDNR allocation of Lake Michigan water.

8%

Return on Rate

Includes the cost of each wholesale customer’s share of making improvements to the Evanston system based on the value of those assets (items included in the Depreciation line) and is multiplied by the “Fair Value Rate” (10%) to cover debt service and provide a profit to the wholesaler.

64%

The rate is updated annually based on the audited value of Evanston’s assets, the actual costs of operating and maintain the system, and the actual amount of water used by each wholesale customer. The only way that the Evanston rate can be adjusted is if Evanston’s audited costs also increase. Since the Village only pays its proportional share of operating, maintenance, and capital costs, the increase in cost would be shared by all of Evanston’s wholesale and retail customers. This means that unlike Chicago, the cost cannot be arbitrarily increased.

The water supply agreement outlines rates through 2022. After 2022, rates will be normalized and the Village will only be responsible to pay for improvements that are directly related to the facilities that provide service to the Village. This includes the four identified transmission mains that supply the south water tower or improvements to the water plant. Capital improvements that would not affect the rate would include things such as replacement of distribution water mains, water meters, or any transmission main not included in the rate model. The water supply agreement states that after 2022, if any improvements to the Evanston system would result in an increase greater than 4%, that increase would be spread out over multiple years to ensure that there would not be spikes in the rate.

Based on the rates in the water supply agreement, the Village anticipates saving approximately $1.2 million per year in water supply costs. These savings will be used to first pay for the debt service on the transmission main that will connect the Village’s system to Evanston’s system. The remaining wholesale cost savings will be used to finance the replacement of aging water mains throughout the Village’s system. Additionally, the retail water rate for Lincolnwood customers is anticipated to be stabilized until 2023.

To learn more about the improvements to the water distribution system that the Village will be pursuing over the next 10 years, please see the Infrastructure Improvement Plan

Public Meeting Packets and Videos
Public Meetings

April 17, 2017

Water Fund Workshop

Packet

 

August 15, 2017

Committee of the Whole – Water Discussion

Packet

Video

September 5, 2017

Village Board Meeting – Route Study Contract Awarded

Packet

Video

May 1, 2018

Committee of the Whole – Water Supply Agreement Discussion

Packet

Video

June 19, 2018

Committee of the Whole – Route Study Report

Packet

Video

July 17, 2018

Village Board Meeting – Transmission Main Design Contract Awarded

Packet

Video

July 23, 2018

Village Board Meeting – Water Supply Agreement Approved

Packet

Video

March 14, 2019

Public Information Meeting – Transmission Main Design

Packet

Video

 

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