Water Rate Memo
VILLAGE OF
BUFFALO GROVE
MEMORANDUM
DATE: November 25, 2019
TO: Dane C. Bragg, Village Manager
FROM: Mike Reynolds, Director of Public Works
SUBJECT: Infrastructure Modernization Project
Background:
As the Village’s first generation water and sanitary sewer infrastructure readies for replacement
and rehabilitation, the Village Board and staff teams have worked cooperatively to develop a
strategy to ensure that infrastructure replacement can be replace d in a timely manner. The
goals of the Infrastructure Modernization Project are to manage neighborhood infrastructure in
a way that ensures a high-level of customer service, maintains property values and minimizes
disruption to residents.
Currently, there is a sizeable backlog of needed replacement projects. In 2012, the Village
Board passed a series of volumetric (metered) consumption rate increases targeted to develop
capital reserves for infrastructure replacement and rehabilitation. Unfortunately, between a
significant economic downturn which saw household size decline and a major evolution in the
efficiency of water-consuming home appliances, consumption of potable water has declined in
the Village since 2012. Because of this decline, sufficient revenues could not be generated to
keep pace with required infrastructure.
In an effort to understand the full extent and impact of these limitations , Public Works had to
understand all aspects of the water system to provide a more holistic long -term approach to
funding, fees, rates and capital planning for the water and sewer system. In 2018, the Village
undertook the task of engaging in a comprehensive water & sewer system study. The study
was completed in early 2019 with the results presented to the Board at the June 3, 2019
Committee of the Whole meeting.
Through the completion of this study the Village has:
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Packet Pg. 31 Attachment: BOT 12022019 Capital Spending Memo (Infrastructure Replacement Plan)
Evaluated system capacity with regard to system expansion and future water sales
opportunities.
Provided a system condition assessment to deter mine the long range replacement plan
and associated costs of the plan as well as a provision to “catch up” on deferred
replacements.
Provided updated fee and rate alternatives to adequately fund the system over the next
twenty years.
Reviewed bonding options; and both bonding and non-bonding alternatives are
presented and discussed.
The Village Board has committed to addressing the infrastructure backlog as well as long -term
system replacement and taken bold steps required to implement an infrastructure
modernization project that will be sustainable well into the future . The Village Board directed
staff at the August Committee of the Whole (COW) meeting to develop a formal funding
strategy for the water and sewer utility fund that will allow needed cap ital improvement to occur
over the next 20 years. The goal was to develop a funding strategy with no impact to the tax
levy and maintain a competitive water/sewer rate amongst other providers within the region.
The Village Board and staff have devoted a gr eat deal of time to developing sustainable
practices to improve and maintain core infrastructure . On November 4, the Village Board
approved two significant revenue streams for this purpose, the implementation of a fixed facility
fee and water/sewer rate i ncrease for water and sewer main replacement and a local motor
fuel tax to fund road improvements . These actions will allow the Village to tackle the first
generation of major water and sewer infrastructure replacement as well as street repair and
replacement. In 2020, the Board will consider a bond issue totaling $24 million - $14 million
for water/sewer and $10 million for streets, to begin our infrastructure modernization project .
Over the next five years, the Village projects investing $50 million or more into water, sanitary
sewer and streets. In support of this process, Village staff prepared several analyses for the
Village Board to review in its decision -making process, including an updated 20-year
water/sewer pro-forma and a 20-year overlapping debt strategy. The long-term goal is to
transition from a debt/cash strategy to a cash -only strategy (pay-as-you-go) to fund all system
replacements. Based on the analysis, the Village will be able to move to a cash -only funding
strategy by 2038.
Future Planning:
Should the Village Board approve the long term debt strategy, the infrastructure modernization
project will begin in the spring of 2020. Due to the development patterns of the Village since
1958, much of the water and sewer infrastructure as well as road deficiencies exist in the Cook
County portions of the Village. However, given the desire to balance the needs of the entire
village with this initiative, several projects are planned village -wide over the next five years and
beyond.
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Packet Pg. 32 Attachment: BOT 12022019 Capital Spending Memo (Infrastructure Replacement Plan)
Much of the immediate need is based upon the projects outlined in the Strand Water Study
Report and are consistent with the service interruption experience as reviewed previously.
Additionally, as we layer in the village’s road program needs, the task of identifying the scope,
scheduling and coordinating of the timing of the work becomes the biggest challenge.
The initial five-year infrastructure modernization project resource allocation t able is presented
below.
Year Water Street Sanitary Storm Other Total
2020 $ 5,029,250 $ 8,561,530 $1,977,400 $ 560,000 $ 1,215,000 $17,343,180
2021 $ 3,348,000 $ 4,555,250 $2,371,400 $ 570,000 $ 899,000 $11,743,650
2022 $ 7,560,023 $ 7,572,500 $ 279,000 $ 550,000 $ 850,000 $16,811,523
2023 $ 6,867,309 $ 3,266,250 $ 400,000 $ 550,000 $ 850,000 $11,933,559
2024 $ 5,657,462 $ 4,906,250 $1,535,000 $ 550,000 $ 850,000 $13,498,712
Total $29,812,044 $ 26,455,530 $4,534,800 $ 2,960,000 $ 5,538,000 $71,330,624
Staff is currently completing cash-flow analysis for the five-year program. It should be noted
that additional debt will be required to maintain the street projects timeline (concurrent with
water/sewer projects) beginning in 2022 -2023. The required debt and cash flow analysis will
be updated and presented to the Village Board in 2020.
The 2020 infrastructure modernization project resource allocation table is presented below
Staff will present project specific details including the 2020 projects and impacted
neighborhoods at the December 2nd Village Board meeting.
2020 Projects
Water and Sewer $5,029,250
Street Work $8,561,530
Sanitary Sewer $1,977,400
Drainage $660,000
Other $1,215,000
Total Projects $17,343,180
Recommendation:
Staff recommends that the Village Board approve the long term debt strategy and the
infrastructure modernization project as presented.
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Packet Pg. 33 Attachment: BOT 12022019 Capital Spending Memo (Infrastructure Replacement Plan)