The Lake Zurich village board approved a water rate increase of 15 percent, at Monday night’s village board meeting.
The rate increase was necessary because water and sewer fund revenue does not cover expenses and the fund is struggling to keep up with an aging infrastructure, according to Finance Director Jodie Andrew.
Residents’ water rates will increase by 7.4 percent on May 1, 2013, and another 8 percent on May 1, 2014.
Andrew said the average household of four, using 8,000 gallons of water per month, will see an increase of $6.88 per month this year.
The water rates were increased by 25 percent last January. At that time, the village considered raising the rates even higher and tentatively agreed to a rate increase for August. However, the increase was postponed to allow the new finance director (Andrew) and new auditors time to conduct a thorough review of the water and sewer fund.
During the Capital Improvement Plan (CIP), village staff divided water projects into critical and necessary. Funding both would require another 25 percent increase as well as significant bond issuance. Funding only critical expenses requires a 15 percent increase and a smaller bond issuance. Read the entire analysis of water rate increases.
During public comment at the beginning of the meeting, three residents—Bill Leahy, Mike Vujica and Jim Tarbet—urged the village board not to raise water rates.
Vujica wondered how the fund was running a significant surplus in recent years which turned into a deficit. He questioned numerous transfers from the water and sewer fund to the general fund in the mid-2000s. Tarbet argued that the rate increase isn’t necessary because there are expenses being charged to the water and sewer fund that belong elsewhere.
Trustees Tom Poynton and Rich Sustich also questioned the history of the water fund and previous transfers out of the fund.
Sustich noted that data showed the ending working capital in the water and sewer fund in Fiscal Year 2010 was $2.34 million.
He said when Andrew was hired as finance director she discovered serious discrepancies in the numbers.
“The bulk of it appears to be more of an accounting error more than anything else,” Sustich said.
Poynton said the discrepancy in the numbers has not been fully explained. He said the board doesn’t want to raise water rates, but the funds are necessary for critical projects.
“I apologize for the clerical error, but it was way before any of us got on the board,” Poynton said.
Poynton also noted that, in past years, the village allowed transfers of $500,000 from the water and sewer fund to the general fund that apparently were never replaced.
Andrew said the practice of transferring funds from water and sewer to the general fund is common among municipalities, however the transfers should be logical.
The village’s current board stopped the practice of transferring funds from sewer and water to general fund.
“I cannot speak to the past of the water and sewer fund. Next year we are taking a close look at what costs are being charged and are expecting a significant reduction in the administration charged to the fund. We are taking a closer look to be sure what is being charged is appropriate,” Andrew said.