Village of Riverwoods

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Sanitary Sewer Utility Fee Coming to Riverwoods

September/October 2014

By John Norris, Mayor of Riverwoods

Let me get right to the point. The Village of Riverwoods will begin charging a new monthly sanitary sewer utility fee of $18 per home, starting January 1, 2015. This fee amounts to $216 per household annually and is necessary to pay for repairs to the Village sanitary sewer system and to accumulate a reasonable reserve in the Sewer Fund.

I. Background

The Village has an agreement with Lake County under which the County performs routine sewer maintenance to the Village system. It is a very unusual relationship that has allowed the Village to forego a public works department, maintain a small Village staff and avoid the problems arising from escalating health care and pension costs.

However, the County doesn’t perform capital repairs or replacements for us. The Village has to pay outside contractors to replace a broken Village main out of the Sewer Fund. The Village owns 23 miles of gravity sanitary sewer, four conventional sanitary lift stations, and 4,650 feet of sanitary sewer forcemain. The current system value is approximately $25 million and 70% of this system was installed prior to 1980.

In 2012, the Village Engineer performed utility reserve studies and the Board adopted a policy to accumulate a reasonable amount of reserves in the Sewer Fund. We have a five-year projection, updated periodically, that estimates future capital repairs based on the age of the system, known problems, etc. The annual expenditures of the Sewer Fund should average about $250,000 annually over the next five years. But we have essentially no revenue to pay for that.

For the Sewer Fund to be in equilibrium, we need revenues coming in to replace the outflow. We also need to build the reserve balance in the Sewer Fund to deal with unforeseen expenses that can wreak havoc with a five-year projection. Currently the “rainy day” balance in the Sewer Fund is less than $100,000 and will be depleted before the end of this year.

II. Revenues

So, how has the Sewer Fund obtained money? In the last 20 years, all but a few Village residents have connected to the sewer system and paid a connection fee into the Fund. These connection fees that once funded the Sewer Fund have come to an end. At present, the County bills each resident – that won’t change. Most of the County’s charge is retained by the County for maintenance of county mains and treatment plants into which our system discharges. The balance of the monthly charges since 2008, annually about $40,000 or less, has been remitted to the Village.

In recent years, the amount remitted by the County has been too small to cover the actual maintenance costs incurred by the Village. This deficiency has created negative cash flow for the Sewer Fund. We have tried to adjust the arrangement with Lake County under which it would increase the monthly remittance to the Village, but the formula in place has not proven as flexible as we intended. The County has proposed restructuring of our agreement in a way that the Board and I have found unacceptable for a number of reasons, including a requirement that we join a multi-agency committee that could require us to establish higher rates. The stated intent is to force communities to make necessary upgrades, but the manner of coercion seemed particularly harsh for a small community such as Riverwoods.

The Board firmly believes that the Village should maintain local control as much as possible. The Village of Riverwoods should decide whether or not to place a surcharge on Riverwoods’ residents for repairs and reserves, not a county-appointed multi-agency committee.

III. Going Forward

The Village has delayed charging a fee as long as it could, but the reserve in the Sewer Fund has been virtually exhausted. While we will be able to pay for repairs and maintenance budgeted for this year from the Sewer Fund, I anticipate having to transfer monies from the General Fund to fund next year’s maintenance and repairs.

In view of these facts, the Village Board authorized the monthly sewer fee of $18. I should note that even when this sewer fee is added to the amount charged by Lake County, the total amount Riverwoods residents will be paying for sewer service will still be below the average cost paid in the general area.

The charges we anticipate collecting from the county remittance and Village surcharge fee should cover anticipated repairs and gradually start restoring the reserve balance in the Sewer Fund.

The General Fund has also committed (by accounting designation) a portion of its fund balance to support the Sewer Fund until the Sewer Fund has adequate reserves. The General Fund backstops the costs to repair all other Village infrastructure and supports many other uses. That is why it is important for the Sewer Fund to reach a balance between revenues and expenditures that will support its activities in the long run.

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