History and Background on the DuPage Water Commission

1. The DuPage Water Commission (DWC) was formed in 1984 to bring Lake Michigan Water to DuPage County. In Nov. 1985 voters approved a referendum that gave a quarter cent sales tax* to DWC and allowed them to issue $150 million in general obligation bonds.

2. Since 1986 DWC has collected about $581 million in sales tax, with no strings attached and no accountability to the taxpayer. $36 million of the original general obligation bond remains unpaid.

3. In 2003, when legislation required DWC to transfer $15 million, or about half of the sales tax income, to the county each year for five years, the commissioners predicted dire consequences—they said that they would have to charge 25% more to make up the difference. What actually happened was that in 2005 they reduced rates by 12% (from $1.65 per 100 gallons to 1.45), and DWC continued to generate budget surpluses!

4. In fiscal year 2007, the $36.4million in sales taxes funded the last $15 million payment to the county, a 50% reduction in the “fixed cost” rate of customers** ($7.1 million), $13 million in general obligation bond payments, and some capital improvements. (see a below)

5. DWC ran a $17 million loss from operations in FY2007, 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 surplus (see b below) and a reserve exceeding $100 million.

6. DWC could have given up the sales tax in April 2007 and still satisfied its obligation 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 years of payments on the general obligation bond, the bond for which voters approved the sales tax in 1985.

7. However, because DWC operates autonomously and without accountability, it chose a course of action that would guarantee it would be able to keep the sales tax:

--In April 2007, DWC passed yet another rate decrease, 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 residents. While the rate paid by the Charter Members decreased by 36% since 1993, residential rates have increased an average of 18%! Glen Ellyn, for example, now buys water from DWC for $1.25 per unit, and charges residents $4.92 for that same unit of water.

-- In April 2007, with a reserve over $100 million and faced with the embarrassing evidence that it no longer needed the sales tax, DWC gave $40 million in cash to the Charter Members, no strings attached.

8. Since the current Water Commission includes four mayors, a former mayor, and a Director of Public Works from Charter Member communities, it is 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.

9. Less than a year later, Chicago is raising rates to DWC, which plans to raise its rates by 54% over the next three years. Municipalities are expected to pass along the large rate increase, even though they did not all pass along the many decreases.

10. Currently DWC’s manager has proposed an inflated budget in order to continue to justify the need to collect the sales tax. By not earmarking the surplus to pay off the bond, lowering a rate that was already producing operating losses, and blatantly giving $40 million away, DWC now can say it needs the sales tax for at least 4 more years. Even after the bond is paid off in 2011, DWC can continue to collect the quarter cent sales tax to spend or give away as the Commissioners wish. This needs to be stopped.

11. DuPage United made numerous attempts to stop the rebates from happening. 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.

12. Much of the damage is done, but it is not too late to prevent future irresponsible waste of taxes.

The legislature has the authority and responsibility to change how DWC operates

* The WC collects the sales tax on all purchases (except food and drugs) made in DuPage County, regardless of whether a community gets Lake Michigan water or not.
** Note that “customers” of the WC are the government units that purchase the water for their residents. Residents do not buy water directly from the WC.

a. From “Management’s Discussion and Analysis”, p. 15 of the DuPage Water Commission’s FY2007 audited financial reports.
b. p. 21 of same document, available online at the WC website