Oswego trustees review three water-rate scenarios as Lake Michigan connection costs rise

Oswego, Ill. — The Village of Oswego Board of Trustees on April 8 reviewed an updated water and sewer rate study showing capital costs for the community’s Lake Michigan connection and related projects have increased to about $130,100,000, prompting staff to present three alternative rate scenarios and seek policy direction.

Finance Director Andrea Lambert and Baxter & Woodman consultant Mark Seifert told trustees the study updates the 2023 analysis after more detailed project scoping. “Cost estimates have increased since that time necessitating an update to the study,” Lambert said. Seifert emphasized the need for flexibility in financing: “A word you’re gonna hear a lot from me tonight is flexibility.”

Why it matters: The board must adopt a rate ordinance timed with the FY2026 budget that preserves required operating and debt reserves while funding construction and loan repayments for the Lake Michigan connection and other system upgrades. The study assumes a $60,000,000 WIFIA loan (roughly 49% of eligible project costs), two GEO bonds ($20 million and $16 million) and an IEPA low-interest loan (~$15.5 million, competitive). Baxter & Woodman estimated the village could save up to $12,000,000 by using a WIFIA loan instead of a general-obligation bond for the same borrowing amount.

What was proposed: Staff presented three scenarios that all meet reserve goals but differ in rate structure and timing. - Scenario 1 (baseline rate structure, no grocery tax): annual fixed-fee increases to the 3/4-inch meter of $2 in year 1, $3 in year 2, $4 in years 3–4, $10 in year 5 and $15 in year 6, plus volumetric increases of roughly 7%, 10% and 12% for tiers 1–3. Sewer rates increase 4% annually (the current ordinance). - Scenario 2 (use existing 1% grocery tax directed to water/sewer capital): holds fixed fees steady years 1–4, then larger jumps in years 5–6 (year 5: $10; year 6: $20) but yields lower immediate residential bills because grocery-tax revenue covers some capital needs. - Scenario 3 (existing rate structure plus grocery tax): a $4 annual fixed-fee increase for six years with the grocery tax allocated to the capital fund, producing the lowest fixed fee in near-term years but a larger ending fund balance.

Sample impacts: For a 1-inch meter (10,000 gallons bimonthly in Stafford’s sample), the consultant showed bimonthly bills near $125 under scenario 1, about $122 under scenario 2 and roughly $129 under scenario 3 in the first projection year; by 2031 the scenarios converge within about $10–$15 of each other per the presentation.

Staff recommendations and board direction: Staff recommended increasing the standard tap-on (connection) fee from $2,200 to $5,000 for future developments, noting that an increase would be phased in for newly approved projects rather than retroactive to already-approved projects. Several trustees said $5,000 seemed a reasonable minimum and asked staff to return with comparative data for Plainfield, Yorkville and Montgomery. Trustee feedback split on the grocery tax: some trustees opposed adding or relying on a new local tax the board would need to adopt or retain, while others supported using the existing 1% grocery tax to reduce immediate bill impacts and build a larger capital reserve. Multiple trustees favored a gradual, predictable rate path rather than a strategy that keeps rates low through 2030 and then imposes a large spike in 2031.

Other fiscal details: The presentation described several funding tools and assumptions: conservative expense escalation (2% annual), population projections tied to CMAP forecasts, a move to an inclining block volumetric rate beginning Jan. 1, 2026 (first appearing on March 2026 bills), and a range of debt terms for GEO bonds (25–30 years). The WIFIA loan structure provides amortization flexibility and permitted deferments that the consultant said would help the village manage cash flow during early project years.

Next steps: Staff will return with more detailed tap-on fee data (comparisons to peer towns), refined projections using updated nearby-community assumptions, and draft ordinance language ahead of the November ordinance tied to the FY2026 budget. The village also promoted a community coffee on April 12 where staff and engineer Corinna Petru (Baxter & Woodman) will answer technical questions.

Quotes: “Our goal is to provide the village with the maximum amount of flexibility in the repayment and for future capital projects,” Seifert said. Lambert added that updated estimates require a new rate study because “cost estimates have increased since that time.”

The board did not vote on a rate ordinance at the meeting; it provided staff with direction to pursue an increase in tap-on fees (staff to return with options including a $5,000 baseline) and to refine the grocery-tax analysis for consideration at a future meeting.