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A Presentation on Water & Sewer Rate Design Alternatives and Their Potential Impacts on Residential and Commercial Water Bills
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Introduction
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Following the presentation on the initial phase of the 2025 Water & Sewer Rate Study, NewGen Strategies and Solutions collected feedback from the Finance Committee on rate methodology and billing format strategies for the future. NewGen is returning with a presentation on the three requested rate structure alternatives in an effort to collect additional feedback from the Village Board. The additional feedback collected will be used to inform NewGen’s recommendation for water and sewer rates for 2027-2030.
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Recommended Action
Village staff are not seeking Village Board action as part of this presentation.
Prior Board Action
The Village Board approved the water rate ordinance for 2026 in accordance with the initial recommendations from the 2025 Water & Sewer Rate Study on November 11, 2025 (ORD 25-197).
Background
Following the presentation on the initial phase of the 2025 Water & Sewer Rate Study, NewGen Strategies and Solutions collected feedback from the Finance Committee on rate methodology and billing format strategies for the future (MOT 25-231). NewGen is returning with a presentation on the three rate structure alternatives, that the Finance Committee requested to explore further, in an effort to collect additional feedback from the Village Board.
Those rate structure alternatives are:
1.) Volumetric usage charge coupled with a fixed rate charge based on meter size (existing).
2.) Residential water rates versus commercial water rates.
3.) Inclining water rate charge based on increased usage meant to promote water conservation.
NewGen will explore the advantages and disadvantages of these alternative rate structures and provide sample water bills to show the potential impacts of each rate alternative on both the average residential and commercial water user. The additional feedback collected will inform NewGen’s recommendation for water and sewer rates for 2027-2030.
Timing Considerations
Following the feedback collected from the Village Board regarding rate alternatives and lead service line replacement, NewGen Strategies and Solutions and Village staff will prepare an updated financial forecast and recommend a rate structure alternative to the Finance Committee on July 16, 2026.
At the July 16th meeting, Village staff will recommend that the Finance Committee make a recommendation to the Village Board of the preferred rate structure for 2027-2030.
Following these two meetings, NewGen Strategies and Solutions will return to the Village Board in early October to present the preferred rate structure and water and sewer rates for 2027-2030. At that time, Village staff will be seeking Village Board direction on implementation of these recommendations.
Financial Impact
This presentation is intended to gather preliminary feedback from the Village Board and does not recommend approval of a specific rate structure or rate adjustment at this time. However, future Board direction on water and sewer rate structure alternatives will have financial impacts for both utility customers and the Water and Sewer Fund.
Those impacts will be further evaluated by NewGen and Village staff as part of the final rate recommendation. The analysis will consider customer bill impacts for residential and commercial users, revenue sufficiency, projected operating and capital expenditures, Lead Service Line Replacement funding needs, reserve requirements, and the long-term financial sustainability of the utility system.
Operations Impact
Approximately 25 hours have been dedicated to the Water & Sewer Rate Study between 2025 and 2026 by Public Works staff. It is anticipated that an additional 20 hours will be needed by Public Works staff to compile feedback from the Village Board, work with NewGen to incorporate that feedback into their recommendations, and assist Finance with forecasted water and sewer revenues and expenditures.
Finance will also dedicate staff time to the Water & Sewer Rate Study to ensure that both NewGen and Village staff recommendations are appropriate and incorporated into the water billing program.
DEI Impact
Raising water rates, or alternatively, changing water rate structure, can have diversity, equity, and inclusion implications, especially in how they affect low-income and marginalized communities. Water prices have been increasing faster than household incomes, putting disproportionate financial burdens on low-income and marginalized communities, resulting in an affordability gap and forcing households to sacrifice rent, food, medical care, or other essentials, including hygiene.
When households cannot pay elevated water bills, they often face shut-offs and potential liens. Water shut-offs and the economic strain they cause disproportionately affect African-American families, elderly individuals, people with disabilities, and families with children. Lack of running water, or the need to conserve water to lower costs, severely hinders basic hygiene, which poses potential public health risks.
Community Input
There has been no community input given in relation to this item.
Staff Recommendation
There are no Village staff recommendations, at this time, as this is a presentation meant to elicit feedback from the Village Board.
Alternatives
There are no alternatives, at this time, as this is a presentation meant to elicit feedback from the Village Board.
Anticipated Future Actions
NewGen Strategies and Solutions is anticipated to return to the Village Board in October 2026 to finalize recommendations for Water & Sewer Rates for 2027-2030. Prior to their return to the Village Board, NewGen will have presented an updated financial forecast and recommended rate alternatives to the Finance Committee for their review ahead of the 2027 budget season.
Prepared By: Erin Duffy, Deputy Public Works Director
Reviewed By: Jack Malec, Assistant to the Village Manager
Approved By: Kevin J. Jackson, Village Manager
Attachment(s):
1. Rate Setting Alternatives Presentation
2. Drinking Water 1-2-3 Guide for Elected Officials