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.”
Only the state
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.
¹From p.21 of the DuPage Water Commission’s FY2007
audited financial reports.
DuPage United 12/2/2009