A much anticipated water-reservoir study indicated that the complete replacement of the City’s five million gallon water reservoir, or “clearwell,” is economically preferable to any repair options because of current low interest rates and thus low borrowing costs. As a result, City Council appears poised to approve the approximately $20 million project with work to begin as soon as 2016.
According to a presentation by Utilities Director Dave Stoneback, the project will result in no increase to Evanston water rate payers. The City’s contract with the Northwest Water Commission (NWC) requires that body to pay its share of infrastructure improvements to the water distribution system. According to the staff memo, NWC will be responsible for 91% of the cost of the reservoir replacement.
Frequent water department critic Junad Rizki approved of the news. “It appears the NWC will pay 91% of the cost of this,” he said. He said he approved of the replacement project, but urged diligence in making sure the contributions were made, because “if they don’t pay this, there will be a 20% water rate increase.”
The new reservoir will be in approximately the same location as the current reservoir, which was built in 1934. The reservoir sits on property owned by Northwestern University next to the water plant. The City acquired use of the water reservoir property decades ago in exchange for what is now the exclusive Northwestern beach.
Apparently, Northwestern has asked that the new reservoir shift slightly to the east to allow the relocation of a University access road. The cost of such a move, according to staff information, will be about $800,000. Northwestern has agreed to pay the entire amount, Mr. Stoneback said.
The City’s Utilities Commission, represented by Chair Richard Lanyon, said it favored the reservoir replacement project, given the current borrowing costs. The City will have “a new, state-of-the-art asset with a 100-year lifespan,” he said, and “no need to inspect and repair every five years.” It is better to complete the project now, he added, while the NWC contract requiring them to contribute is still in place. The contract expires in about 20 years.
Mr. Stoneback said the breakeven point on the interest rate would be about 5%. If interest rates are at or above 5%, it would make more economic sense to repair the existing reservoir than to replace it. If interest rates are below 5%, the study indicated, it makes sense to replace. The City anticipates borrowing money from the Illinois Environmental Protection Agency at a rate of about 2.5%.
Replacing the largest reservoir is not the end of the story, as it is only one of nine clearwells in the system, though it is by far the largest. Older clearwells will also need to be repaired and ultimately replaced. Mr. Stoneback recommended staggering the work, replacing the largest in 2016, then the oldest in 2045, and finally the remaining clearwells in 2065.
The City will have to shoulder the first year of debt service on its own, because the NWC is required only to pay for infrastructure that is operating and in service. Mr. Stoneback said no water rate increase will be required, however, because first-year debt service can come from the City’s regular capital improvement project budget.
Other improvements to the system were recommended by the study. Right now, said Mr. Stoneback, the City’s clearwells can hold about 9.4 million gallons. The pumping system, however, can only access about five million gallons. “Modifications” will allow access to more, he said.
Finally, the study indicated that the water department’s “storage capacity is appropriate,” said Mr. Stoneback, and no new or expanded reservoir is necessary. This is something “staff didn’t realize,” he added. “We thought we needed more.”