DuPage United

An Organization of Organizations

DuPage United

History and Background on the DuPage Water Commission
(Or “How the DWC Blew a $100 million Reserve in Two Years”)

1. The DuPage Water Commission (DWC) was formed in 1984 to bring Lake Michigan Water to DuPage County. Mayors appoint 6 Commissioners to represent them on DWC and the DuPage County Board appoints the other 6 Commissioners. The DWC Chair is appointed by the DuPage County Chair, with approval by the mayors, and the appointed Chair is then confirmed by the Water Commission Board.

2. A 1985 referendum allowed the DWC to issue $150 million in bonds and to collect a ¼ cent sales tax* to meet the bond obligations.

3. Sales tax revenues have far exceeded the bond payments of $13 million per year (last payment: March 2011). DWC has to date collected about $650 million in sales tax, with no strings attached and no accountability to the taxpayer.

4. By the 1990’s the excess sales tax was generating so much extra money that the DWC was able to reimburse Charter Members the $60 million they had originally invested in the infrastructure.

5. In 2003 legislation required DWC to transfer $15 million, or about half of the sales tax income, to the county each year for five years. In spite of that significant drain on their sales tax income, DWC reduced rates by 12% for FY 2005, (from $1.65 per 1000 gallons to 1.45), which resulted in a $7.7 million loss from operations…and still had a budget surplus!

6. By FY 2007, DWC ran a $17 million loss from operations, giving away water to the Charter Members at below cost while collecting sales tax from all of DuPage to balance their books, ending with an $18.5 million surplus1 and a reserve exceeding $100 million (which was built up from excess sales tax and generated significant investment income).

7. It was very clear that DWC no longer needed the sales tax.

8. DWC could have given up the sales tax in April 2007 and still satisfied its obligations by:

--Running the regular operations at least at breakeven, rather than at a loss, i.e. charging DWC
customers** what it really costs to supply them with water, including personnel costs and ongoing
capital improvements. There were sufficient reserves to move to breakeven over a few years.

--Earmarking part of the bloated reserve to pay the final four payments on the bond for which voters
approved the sales tax in 1985.

9. Instead, faced with the embarrassing evidence that it no longer needed the sales tax, the DWC (which operates autonomously and without accountability), guaranteed it would be able to keep the sales tax by:

--passing yet another rate decrease to reduce the reserve by generating larger operating losses,
charging only $1.25 per unit for water that cost DWC $1.33 per unit. [As in the past, most Charter
Members did not pass the rate reduction on to their own residents. Rates paid by the Charter
Members decreased by 36% from 1993 to 2008, but residential rates increased an average of 18%.]

-- giving away $40 million in cash to the Charter Members, no strings attached, which reduced both
the reserve and future investment income.

10. Since Water Commissioners included four mayors, a former mayor, and a Director of Public Works from Charter Member communities, it was in their self-interest to continue to collect the sales tax from all over DuPage and divert it to their communities in the form of discounted water rates and rebates.

11. Less than a year later, DWC made plans to raise its rates by 54% over the next three years. DWC blamed this on Chicago, even though it was no surprise-- Chicago had been giving DWC discounts on water to repay construction loans, and the discounts were ending on schedule.

12. By not earmarking the surplus to pay off the bond, lowering a rate that had been producing operating losses since 2005, and blatantly giving $40 million away, DWC set itself on a fiscally irresponsible course, with mounting losses from operations:
--FY2005: -$ 7.7 million
--FY2006: -$ 13.7 million
--FY2007: -$ 17.1 million
--FY2008: -$ 22.2 million
--FY2009: -$ 26+ million

13. DuPage United made numerous attempts to stop the rebates from happening and argued that DWC should be operating as an ongoing operation, without the need for a sales tax. Many representatives of member institutions attended and spoke at DWC meetings in February and March 2007. Op-eds and letters to the editor were published. All DuPage state legislators, county board members and water commissioners were contacted as well as the Attorney General and media, but no one wanted to challenge the mayors and managers of DuPage County.

14. DWC is now OUT OF CASH and wants to take out loans to pay bills now and issue new bonds next year. At the November 25 DWC meeting, it was publicly acknowledged that the Commissioners have no idea where the last $20 million of the reserve went.

15. Between April 2007 and July 2009, the entire $100 million dollar reserve disappeared
—a $40 million give-away, huge operating losses year after year from under-priced water, decreasing revenue from investment income, questionable capital projects, and now what is being called a “budget snafu.”