Your water rate could be double your neighbor's; here's why

Attending Palatine's annual state of the village address last month, Hoffman Estates resident Don Grau was bewildered by a chart listing 47 other suburbs with water rates higher than Palatine's.

Especially disturbing was that his own village's rate was listed at more than 2.5 times Palatine's.

"It was shocking to see the spread of rates," Grau said.

His understandable and probably common misperception, however, was that all Lake Michigan water in the suburbs comes from the "same source, same pipeline, same pumping station."

Whether Chicago or Evanston is the original source of lake water is just the first of many reasons why one suburb's water rate differs from another's, as the two charge much different rates.

In fact, officials from several Northwest suburbs said the number of variables that determine a town's water rate makes them almost as individual as fingerprints.

They include the age of the pipeline and its level of improvements.

And even after the real cost of water to residents is determined, there are a variety of ways in which it and the infrastructure can be paid for. These can range from a strict user fee to differing levels of subsidy from other revenue sources like property taxes.

Even then, a random list of water rates may not provide a true comparison. Some villages, like Schaumburg, reported their combined water and sewer rates, while others like Buffalo Grove isolated the water portion.

Palatine Village Manager Reid Ottesen used a list provided by the Northwest Water Commission at the state of the village address. His point was that although the time has come to raise rates to upgrade the village's aging water system and pay for that improvement, Palatine's rate will remain among the lowest in the region.

A big reason Palatine's rate is so low is that in the early '80s, when Palatine was investing millions in converting from wells to lake water, residents chose to have the debt service put on their property tax bills instead of their water bills, Assistant Village Manager Sam Trakas said.

And Palatine actually has four different rates, with only the lowest - for residents and businesses - showing up on the chart Grau saw last month.

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There's another rate for unincorporated properties, a third for properties like churches and government buildings which don't pay property tax, and an even higher one for the Deer Park Town Center in neighboring Deer Park. Palatine must maintain additional infrastructure on its behalf.

Palatine's regular residential rate has already grown from $2 to $2.12 per 1,000 gallons since the list shown at the state of the village. That covers the cost of the system today, but another 5.7 percent jump to $2.24 per 1,000 gallons on July 1 will begin to pave the way for improvements to come, Ottesen said.

Palatine isn't the only community anticipating imminent rate hikes. Bartlett residents will see an even steeper 14.2 percent increase from $4.94 to 5.64 on May 1.

The only rate listed lower than Palatine's on the chart Grau saw last month was Buffalo Grove's at $1.97 per 1,000 gallons. But Finance Director Scott Anderson said Buffalo Grove's rate has actually risen to $2.40 per 1,000 gallons.

Both Palatine and Buffalo Grove's cost efficiency begins with their receiving water from Evanston, unlike communities farther south like Schaumburg and Hoffman Estates that buy it from Chicago at almost four times the price.

Ottesen couldn't pinpoint exactly why there would be a difference between the two rates other than that, as in many areas, Chicago has more overhead costs than most suburban communities do.

Evanston Assistant City Manager Marty Lyons said Evanston signed a 40-year agreement with most of the communities it serves in the early '90s. There are some provisions for cost escalation, but in nearly 20 years, its rate has only risen from 40 cents to 53 cents per 1,000 gallons.

In contrast, Chicago's rate is now $2.01 per 1,000 gallons to the Northwest Suburban Municipal Joint Action Water Agency, which serves seven communities including Schaumburg, Hoffman Estates and Elk Grove Village.

Joseph Fennell, executive director of the agency, said the agency is guaranteed the city of Chicago's lowest customer rate. However, that rate has seen increases in the past three years of 15 percent, 15 percent and 14 percent respectively.

The water agency acts as a wholesaler to the seven suburbs it serves, pumping water from its reservoir near O'Hare International Airport.

The agency's monthly charges to its members differ by volume, debt service, distance and other variables, Fennell said.

While no one likes to see increases of the size Chicago has made in the past few years, the city has explained them as the rising cost of its own infrastructure improvements. It's up to the individual to decide whether to take that explanation at face value, but the agency has had no complaints with either the quality or quantity of Chicago's water delivery, Fennell said.

The agency's current agreement with Chicago expires in 2023. While it's not unfeasible to find another provider at that time, any change would itself be expensive, Fennell said. The question at that time would be whether the long-term costs of a different provider would be low enough to justify the expense of a new pipeline.

Schaumburg Finance Director Doug Ellsworth said there are undoubtedly some cost differences between providers, but he believes most Lake Michigan water costs roughly the same when all factors are accounted for.

Because of the long-term commitments municipalities must make for their water supply, however, there isn't much incentive for providers to compete on price year-to-year, Ellsworth said. Geography largely dictates who will buy water from whom.

Schaumburg Village Manager Ken Fritz said the major challenge that comes from buying water from Chicago is keeping Schaumburg's rate fairly steady from year to year while the city's rate "changes so dramatically and sporadically."

Schaumburg, which pays about $8.55 million a year to buy water, charges residents $5.16 per 1,000 gallons, one of the higher rates in the area. Village officials site a number of factors that add to its cost besides the higher price of buying water from Chicago.

Among those factors are the cost of extra reliability that has been built into the system by a looping of the pipeline to insure against customers being cut off and by construction of an emergency backup pipeline into DuPage County to tap into its lake water system.

Not all of Northwest Cook County is on lake water. Barrington has municipal wells, most residents of Prospect Heights are on private wells and parts of some towns are served by private water companies.

In Mount Prospect, for example, Finance Director Dave Erb said a significant portion of his village's north side receives water not from the village itself but a private vendor called Illinois American Water.

This is a holdover from when that part of Mount Prospect was unincorporated. It was considered impractical to change the nature of the area's water delivery, Erb said.