Suburban water agencies talking with Chicago, but moving forward with $6B plan to sidestep city

The DuPage Water Commission will meet with Chicago representatives Wednesday amid ongoing plans for it to team with its northwest suburban counterparts and bypass the city for access to Lake Michigan water.

Commission board Chair Jim Zay and sources from the city confirmed Tuesday that the two sides will meet in Elmhurst to discuss a new contract that will supply water to the 30 communities, and about 1.5 million people, served by the agency.

But those talks are overshadowed by last month’s announcement that the commission plans to partner with the Northwest Suburban Municipal Joint Action Water Agency on a $6 billion proposal to build a lake water intake, purification station and tunnels stretching across two counties.

The system would serve about 500,000 residents in Elk Grove Village, Hanover Park, Hoffman Estates, Mount Prospect, Rolling Meadows, Schaumburg and Streamwood, as well as the DuPage commission’s members.

It would also end those communities’ reliance on Chicago for lake water. Instead, they would draw from a water intake near Glencoe.

Schaumburg Mayor Tom Dailly, the president and board chair of the Northwest Suburban Municipal Joint Action Water Agency, said rising costs and other issues necessitate a split from Chicago.

“We’ve just gotten to the point where we need to take some action. We can’t stay where we’re at,” he said. “Water is the number one thing for every community. You can drive over crumbling streets, but you can’t do anything when you don’t have clean water.”

According to agency figures, Northwest Suburban Municipal Joint Action Water Agency members’ payments to Chicago have increased from about $19 million to $45 million over the past 15 years. The agency expects those costs to keep climbing as Chicago moves in 2030 to a new method of determining rates based on what it costs the city to serve each customer.

Meanwhile, the agency says water usage has declined 15% since 2009.

Zay said that in 2009, the DuPage commission paid the city just short of $44 million for more than 28 billion gallons of water. Last year, it paid $129 million for more than 27 billion gallons.

The $6 billion proposal, called the Lake Michigan Regional Water Supply Initiative, has met with no objection in discussions with DuPage mayors and managers, he added.

A spokesman for the city of Chicago said the purpose of Wednesday’s meeting is to continue negotiations on a long-term renewal of what the city calls a successful 40-plus year partnership.

The current contract runs until 2041, the year construction of the Lake Michigan project is scheduled to finish.

Zay said the DuPage commission has been trying to reach an agreement with Chicago for eight years.

“I don’t know how much of a negotiation it’s going to be,” Zay said, adding that the commission is seeking lower water rates and control over facilities.

However, the city maintains that operational costs incurred by water systems across the nation have increased, leading to rate hikes. The city spokesman said Chicago rates are competitive with those charged by other major cities.

The city maintains that a better path forward than the Lake Michigan Regional Water Supply Initiative would be a continued relationship with Chicago.

According to its spokesman, if the Lake Michigan proposal were to move forward, it would pose a threat not only to the city and its water system, but also lead to significant rate increases for communities that still receive water from Chicago.

The spokesman also said the cost-of-service model planned for 2030 is the “gold standard” for municipal water suppliers. By reflecting the true cost of service, most of the city’s suburban customers will see a decrease in rates, he said.

However, the suburban water agencies appear intent on exploring an alternative.

Ramesh Kanapareddy, executive director of the northwest suburban agency, said the project could be eligible for a federal loan covering roughly half the cost. Repayment could be deferred until five years after construction is complete, he added.

The remaining costs could be covered through revenue bonds and other sources.

“We are financing the project in such a manner that our end consumer is not paying a lot during construction,” Kanapareddy said. “At the end of the day, we want to provide the end consumer, our residents, with a rate that is financially feasible and in the long run is viable and sustainable.”

The next step is hiring a program manager to lead the initiative as it moves through planning, design and construction, he added.

Dailly said the exact location of an intake pipe into Lake Michigan will likely be studied next year.

In addition, both NSMJAWA and the DWC are working out a governance structure that will see the latter serve as the managing partner, with the former’s consent and approval.

szalusky@dailyherald.com