BACKGROUND
The Northwest Water Commission has been in talks with the City of Des Plaines for the past year concerning the provision of a supplemental water source for Des Plaines. Des Plaines currently purchases its daily potable water supply from the City of Chicago. Due to recent increases in the Chicago water rate (with additional increases planned), the City of Des Plaines has been actively seeking an alternate water supplier at a lower rate.
On September 3rd, the Northwest Water Commission (NWC) Board approved a Supplemental Water Supply Customer Agreement with the City of Des Plaines. On September 15th, the City of Des Plaines Board also approved this Agreement with the NWC. The final step for approval requires presentation to the Village Boards of the four Member communities. At least three of the four Village Boards need to approve the Agreement for it to be formally adopted. All four Village Boards will be considering this Agreement at their meetings on Monday, October 6.
The Agreement provides that Des Plaines will purchase no more than five million gallons of water per day (MGD) from the NWC. This is a supplemental agreement for the supply of water to Des Plaines - Des Plaines will be retaining their connection to the City of Chicago to draw the balance of their average daily usage of six MGD and as a backup in case of emergency. The term of the agreement is for a period of 20 years, or may be terminated sooner should the members choose to dissolve the Commission.
The City of Des Plaines will be responsible to design and construct a transmission main and modify a receiving reservoir in order to take delivery of water from the Commission. The transmission main shall be dedicated to the Commission for its use after construction. Des Plaines has the opportunity to recapture its investment in the transmission infrastructure should the Commission terminate the contract within 10 years, on a declining scale as shown in Section 19 of the agreement.
Based on a pricing methodology recommended by the American Water Works Association and the terms of the Commission’s contract with the City of Evanston, the NWC developed a price for the sale of water to others. Member communities presently pay $1.16 per thousand gallons. Des Plaines will pay 60 cents per thousand gallons higher than the member rate or a minimum rate of $1.78 per thousand gallons. The proposed arrangement would provide gross revenue to the Commission of $3.25 million annually. Subtracting out direct costs for purchase of water, transmission and storage, the net annual revenue to the Commission would be $2.5 million.
The increase in the sale of water will help accomplish two things. First, it provides additional revenue to the NWC to pay for system improvements without raising the rates charged to the Member communities. Secondly, it will provide rate stabilization going forward.
If should be noted that the four existing Members are owners of the NWC and, as such, are the only entities that have a vote in determining NWC policy. Customers are not members and will not have a vote when it comes to NWC business. The NWC Board believes that the addition of customers under these terms does not dilute the Member Village’s investment in the Commission.
Pursuant to the requirements of the NWC’s Member Agreement, approval of customers (service to others) requires approval by 3 of 4 Member communities.
RECOMMENDATION
It is recommended that the Village Board adopt the Resolution Approving the Northwest Water Commission’s Customer Agreement for Supplemental Water Supply with the City of Des Plaines