Updated 10/2/2010
At the Sept. 27 City Council meeting, aldermen took the penultimate step toward raising water rates for all and sewer rates for some. Ordinances articulating those rates and other issues relating to water and sewers were approved for introduction and now await Council’s further deliberation, if any – likely at the Oct. 11 City Council meeting.
The 10 Percent Water Rate Hike:
First in a Series
Utilities director Dave Stoneback said decreasing water consumption is only one reason to increase water rates. The other is the need for $18.1 million in capital improvements to both the water treatment facility on Lincoln Street and the water distribution system. The City would issue bonds to pay for these improvements over a four-year period, and the debt service would be paid from the water fund rather than from property tax revenues.
After the 10 percent rate hike in fiscal year 2011, City staff propose two other increases in subsequent years, of 5 percent then of 3 percent.
Water bills have two components, a “minimum-use” charge and a “quantity” charge; both would be increased by 10 percent. Mr. Stoneback said the aggregate increase on a bi-monthly water bill for a typical single-family home would be about $15, or $90 per year.
The “minimum-use” charge is calculated on 5/8-inch or ¾-inch meter, which most of the 10,720 single-family homes have, for use of 30 billing-units of water (about 30,000 gallons). The 10 percent increase in the minimum-use charge would result in an additional $3.24 on each bill, or a total additional charge of $20.40 per year. Thus for a typical family home, the new minimum-use charge would be about $214 per year.
The second charge, the “quantity charge,” is applied to water use above 30 units. Mr. Stoneback says the typical single-family household uses about 76 additional billing units of water per year, or 106 total. The typical quantity charge of $115.52 per billing cycle would be increased to $126.92 per cycle, he said.
Thus the total water bill for a typical family would be increased from $148 per cycle to $163 per cycle. Thus the total bill per year would be about $978.
Mr. Stoneback provided information showing water rates charged by surrounding communities. Even with the proposed 10 percent rate hike, Evanston’s rate would be higher only than Chicago’s ($2.01) and Highland Park’s ($2.22) and would be lower than those of Wilmette ($2.93), Northbrook ($3.40), Niles ($4.59), Lake Forest ($6.26) and several other communities.
The Sewer Rate: Water Down the Drain
A 2008 study by Virchow Krause (now Malcolm Pirnie, Inc.) found that the sewer fund was running dry. Water conservation has decreased revenues in the sewer fund, because sewer rates are based on water consumption. The sewer system is also in need of capital improvements, and the debt service on general obligation bonds issued for these improvements would be paid through property tax revenues.
The way the City sees it, even an empty house uses the City’s sewer system, as storm runoff and snowmelt will end up in there. But not all property owners pay property taxes, so the City plans to impose a two-tiered sewer rate that would encompass all sewer-users in Evanston. Sewer rates charged to property-tax-exempt organizations would increase, while rates charged to property-tax payers would not. The rate increase would affect about 53 high-volume water-users that do not now pay property taxes, Mr. Stoneback said.
The City proposes issuing $17 million in bonds over the next four years, in part to refinance Illinois Environmental Protection Agency loans that helped pay for the long-range sewer project. To ensure that all users of the City’s sewer system pay their fair share of the debt service on these bonds, the City plans to impose a “reasonable charge” on high-volume water-users that have property-tax exemptions. This plan is fair, Mr. Stoneback said, because the property-tax-exempt entities use the sewer system but would not contribute toward the payment of the debt service, because that charge would appear on property-tax bills, which the exempt organizations do not pay.
The City plans to impose a “reasonable charge” on high-volume water-users that have property-tax exemptions.
Calculating that property-tax-exempt users account for 22 percent of the sewer costs, Mr. Stoneback said, the City would charge the high-volume water/sewer users 22 percent, pro rata, of the annual debt service. That figure, he said – assuming a 5 percent interest rate on the $17 million debt – would be 22 percent of $1.3 million, or about $300,100 per year.
Property-tax payers would assume 78 percent of the annual debt service, or about $1,064,000 per year, he said. This would result in a 2.7 increase in the City’s property tax levy over four years, or about .68 percent per year.
Mr. Stoneback said that Evanston residents pay “just under $1,400 on their annual property tax bill for each $100,000 of assessed value of the property.” Once the full $17 million of bonds are issued, the resulting increase would be about $37.80 per $100,000 of assessed valuation per year, he said.
The City would also implement a “minimum-use” sewer fee, analogous to the minimum-use water fee.
There are 151 property-tax-exempt entities in Evanston – 152 if Rotary International is included. Roatary, while tax-exempt, pays its full share of property taxes.
Of those 151 entities that do not pay property taxes, 45 would see an increase in their bi-monthly sewer bill. The annual increase would range from nearly $165,000 for Northwestern University to $12 for St. Mark’s Episcopal Church, according to figures provided by the City.
The City would also like to “balance” future increases and decreases in the water and sewer bills, so as to minimize pain to taxpayers, Mr. Stoneback said. “We could increase the water rate and decrease the sewer rate in 2013 without additional charges to residents,” he said.
Meanwhile, the City is pursing ways to distribute water to other communities. “We’ve already started to the process,” Mr. Stoneback said. “A hydraulic analysis is taking place now. When it is completed [we hope] we can demonstrate to Skokie that we could distribute water [through their system to adjacent communities] without any problems, such as lowered water pressure, in Skokie or Evanston,” he said. “We are also working with the Northwest Water Commission to see if we can distribute water to their communities,” he added. Doing this would necessitate constructing distribution lines though Skokie and into other communities. Evanston would charge for the treatment and distribution of water, and other communities would set their own water rates.