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Village of Oak Park Water and Sewer Rate Study for 2027-2031
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Introduction
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In early May, NewGen Strategies and Solutions provided a presentation on three rate structure alternatives to collect additional feedback from the Village Board on rate methodology and billing format strategies. NewGen is returning to the Finance Committee with a presentation and formal recommendation on rate structure and water and sewer rates for 2027 through 2031.
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Recommended Action
Review, provide feedback, and propose a rate structure recommendation to the Village Board for further discussion and action in September 2026.
Prior Board Action
There is no prior Board action associated with this item.
Background
While the Village has been able to maintain a healthy Water & Sewer fund balance over the past few years, it is clear that rising costs due to inflation, forthcoming regulatory mandates, and aging infrastructure are quickly putting the Village on a path towards necessary expenditures outpacing anticipated revenues. NewGen assisted Village staff in identifying three key financial goals for 2027 through 2031:
1. Maintain a minimum Water & Sewer fund balance consistent with industry best practices.
2. Stabilize cash flow within the Water & Sewer fund.
3. Increase fixed revenue recovery to approximately 20 percent.
Following an initial rate recommendation for fiscal year 2026, Village staff requested that NewGen explore alternative rate structures that allow the Village to recoup the same revenue while meeting additional Village goals related to affordability, equity, and sustainability.
Following feedback from the Village Board in early May 2026, NewGen Strategies and Solutions will present two water and sewer rate structures and rate recommendations to the Finance Committee, impacting fiscal years 2027 through 2031. The existing rate structure, volumetric coupled with a fixed charge, and one alternative rate structure, increasing block rate coupled with a fixed charge, have been thoroughly explored, and estimated customer bill impacts have been quantified, and examples have been provided as part of the presentation attached.
Timing Considerations
Timely consideration of water and sewer rate structure alternatives and rates is important as the Village prepares the budget for fiscal year 2027 and the capital improvement plan for 2027 through 2031. Any anticipated changes to water and sewer revenues could impact planned expenditures for 2027 and future years.
Financial Impact
There is no budget impact associated with this item; however, the feedback received as part of this discussion has the potential to inform budget decisions as they relate to the Water and Sewer fund in fiscal years 2027 through 2031.
Operations Impact
There is no operating impact associated with this item. The item aligns with the Public Works department’s core service delivery.
DEI Impact
Since water and sewer services are essential public services, the rate structure has the ability to greatly impact affordability disparities. Village staff, along with the consultants at NewGen, spent time considering how the various water and sewer rate structure alternatives impacted customers with different incomes, household sizes, housing types, neighborhoods, ethnicities, ages, and abilities. For example, low-income households may spend a higher percentage of income on water bills, whereas, fixed charges might disproportionately affect low-volume users, which is oftentimes households on a fixed income. The increasing block rate, recommended by the consultants at NewGen and Village staff, encourages conservation while protecting basic “indoor” use that the first tier targets.
Community Input
There has been no community input given in relation to this item.
Staff Recommendation
Village staff recommends that the Finance Committee advance the alternative rate structure, increasing block rate, to the Village Board for discussion and approval.
Advantages:
• Maintains 2026 volumetric water rate for water usage between 0 and 7,000 gallons.
• Phases in water and sewer volumetric and fixed rate increases over five years to meet the financial needs of the water and sewer systems.
• Continues to increase fixed revenue recovery from 8.8 percent to approximately 20 percent over the same five-year period.
• Proposes to meet and exceed the minimum standard, 90 days O&M, and recommendation, 180 days O&M, associated with the water and sewer fund balance.
Disadvantages:
• Additional notification and education of the Village’s residents will be needed ahead of the transition to the alternative rate structure in an effort to reduce confusion and prepare residents for potential impacts to their overall water bill.
Alternatives
Alternative 1:
Maintain the existing Water and Sewer rate structure, volumetric rate coupled with a fixed charge, while allowing for the annual, incremental increases to accrue the necessary revenue to cover expenditures.
Advantages:
• Volumetric rate and fixed charge increases would be evenly distributed amongst all water and sewer users.
• There would be no need for additional notification or education on the customer’s water bills.
Disadvantages:
• There would be no built-in incentive for water conservation.
• All customers would experience the same increases, but the impacts would be disproportionately distributed, affecting low-volume users the most.
Alternative 2:
Maintain the existing Water and Sewer rate structure, volumetric rate coupled with a fixed charge, without any increase to the volumetric rate or fixed charge.
Advantages:
• There would be no perceived change to the customer’s water bills.
• There would be no need for additional notification or education on the customer’s water bills.
Disadvantages:
• Water and sewer revenues would not keep up with the demands on the Water and Sewer fund, and the balance would be drawn down below minimum and recommended levels, reducing the cushion available for system emergencies.
Anticipated Future Actions
Village staff anticipates returning to the Village Board in September 2026 with a formal recommendation on rate structure and water and sewer rates for fiscal years 2027 through 2031.
Prepared By: Erin Duffy, Deputy Public Works Director
Reviewed By: Rob Sproule, Public Works Director
Approved By: Kevin J. Jackson, Village Manager
Attachment(s):
1. Water and Sewer Rate Study- Alternative Rate Structure Presentation