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A presentation by Public Works Agency Director Dave Stoneback at a special City Council meeting on Sept. 19 called for water rate increases of 6% in 2017, 7% in 2018, 11% in 2019, and an additional 11% in 2020. Mr. Stoneback noted, however, that the retirement of several sewer bonds from the Long Range Sewer project will result in lower sewer rates.

The net result on Evanston water bills will be neutral, he said, with the combined water and sewer rates to remain at $6.21 per 100 cubic feet from 2016 through 2021. Measured by gallons, Evanston’s combined water and sewer rate will hold steady at $8.19 per 1,000 gallons through 2021.

Right now, Evanston’s water rate falls squarely in the middle of the pack of the City’s water customers – much higher than Skokie’s $5.26, but much lower than Morton Grove’s $11.96. The other communities are likely to raise rates between now and 2021, though, Mr. Stoneback said, and when they do Evanston will land closer to the most inexpensive combined rates in the area. “We fully believe that other communities will be raising their rates over time,” he said.

The Water Department needs additional revenue, he explained, in order to complete capital projects such as water main replacement while maintaining a cash reserve of at least $3.5 million. The City replaces about 1.5 miles of water main a year and wants to continue to do so without having to borrow money. “Our goal is to phase out borrowing money to replace water mains,” he said, noting that the Water Department’s debt service payments were already “really low.”

The Water Fund entered 2016 with a reserve balance of more than $9.2 million, and expects to close out the year with cash on hand of over $6.4 million, well in excess of the $3.5 million target. A number of major water distribution system projects are in the works, according to the presentation, including $7.2 million for a 30-inch transmission main in 2017 and 2018. The 1.5 miles of water mains is expected to cost just under $3.6 million in 2017 and increase steadily to just over $4 million in 2021.

“What we would like to do is raise water rates,” said Mr. Stoneback, allowing the $6.4 million in 2017 reserves to hold steady at $3.5 million every year, including the cost of annual water main replacement.

Mr. Stoneback made a distinction between the water distribution system, the infrastructure that delivers water from the water plant to residences and businesses in Evanston, and capital projects at the water plant itself. Evanston residents and businesses must pay nearly the entire cost of repairs to the distribution system, he said, but Evanston pays only about 18% of the cost of capital repairs and improvements to the water plant. The remainder of the cost is paid by Evanston wholesale water customers.

Evanston currently has two large water customers – the Northwest Water Commission (NWC), a conglomerate of northern communities – and the Village of Skokie. The NWC uses about 64% of the City’s water production, Skokie, 18%, and Evanston, the other 18%. Under the American Water Works Association (AWWA) methodology, the charges to water customers include the debt service on major water production facilities, and if applicable the distribution system, in water rates charged by the wholesale seller.

NWC paid for and maintains its own distribution pipe from Evanston to its reservoir near Des Plaines, and as a result it does not pay repair costs to Evanston’s distribution system. Skokie would be responsible for a portion of water main replacement costs, but Evanston’s contract with Skokie, negotiated in the mid-1990s, did not apply AWWA methodology but increased costs strictly according to the sluggish Consumer Price Index.

The Skokie contract expires in February 2017, and any new contract will be priced according to AWWA methodology. At present, Mr. Stoneback said, the Village of Skokie receives water from three different access points. The Village is trying to figure out a way to eliminate two access points, thus limiting its exposure to infrastructure costs.

Skokie may not be the only municipality receiving Evanston water come 2018. In the crowd at Monday’s meeting were the city managers of Morton Grove and Niles. Evanston City Manager Wally Bobkiewicz said those two municipalities are “close” to entering an agreement with Evanston.

If the contract is finalized, its term would be 40 years, said Mr. Stoneback. The City would realize additional revenue of about $1.1 million in 2019, increasing to $1.3 million in 2021, he said. In addition, a new Skokie contract would produce additional revenue. Earlier in the year, Des Plaines became a customer of the NWC, resulting in about $500,000 in added revenue for the City.

Water revenue can be kept in the Water Department and result in lower Evanston water rates, Mr. Stoneback said, or it can go into the City’s General Fund – and Evanston water rates can go up.

Council members took no action Monday night – they simply received Mr. Stoneback’s report and thanked him for his hard work. Council will likely receive a request for increased water rates when budget season begins in October.