Oswego to seek federal loan for $99 million cost of Lake Michigan water project

The village of Oswego will apply for a loan to help pay for the estimated $99 million it will cost to bring Lake Michigan water to Oswego.

At the Oct. 15 Oswego Village Board meeting, village trustees unanimously approved applying for a loan provided through the Water Infrastructure Finance and Innovation Act program. The program is administered by the U.S. Environmental Protection Agency.

Trustees also unanimously approved paying a non-refundable $100,000 application fee for the loan. The maximum portion of eligible project costs funded through the program is 49%.

“We’ve already been invited to apply,” Oswego Public Works Director/Village Engineer Jennifer Hughes told village trustees. “So they’ve already vetted our project.”

Village trustee Karin McCarthy-Lange asked Hughes if the loan is guaranteed.

“We believe we’re going to get funding,” Hughes replied. “It’s just a question of how much funding.”

At this time, Oswego’s proportionate costs to extend the transmission mains and install the metering stations for the project are estimated at $88.1 million. In addition, Oswego will have to pay the DuPage Water Commission a $11 million buy-in cost.

The DuPage Water Commission would supply the water. The DuPage Water Commission has offered to provide a 0% interest loan to Oswego to pay for the $11,047,790 capital cost recovery charge.

The total project cost is estimated at $249.2 million. Oswego will be picking up 35.36% of the costs related to bringing Lake Michigan water to the area. Yorkville’s share will be 40.22% and Montgomery’s share will be 24.42%.

Oswego also plans to finance the project through other means, including using the state revolving fund program and selling bonds.

As Oswego Village Administrator Dan Di Santo noted to trustees, the project has been in the works for a long time.

“Since 2014, the village has really been on notice from the Illinois State Water Survey that our aquifers are depleting and not replenishing,” Di Santo said. “And by 2033, our wells will be in significant decline and we could have inoperability of our well system. So we’ve known since then that we need to find an alternate water source.”

In 2021, Oswego along with the neighboring communities of Yorkville and Montgomery decided to make the switch to Lake Michigan water. Oswego is having a corrosion control study done to ensure a smooth transition.

Water and sewer customers in Oswego won’t see their rates increase as much as envisioned to pay for the cost of bringing Lake Michigan water to Oswego. Last November, trustees unanimously approved a new water and sewer rate ordinance to help fund the project.

The village has not increased its rates since May 1, 2022. Utility bills are expected to increase by about 4.5% to 6% annually over the next eight years.

Village officials will review the costs on an annual basis to ensure the rates are adjusted accordingly. Water rates were initially expected to more than double.

A water and sewer rate study determined that the new rates are in line with other communities that receive Lake Michigan water. To help offset project costs, the village has been working to leverage federal and state money, including applying for grants and loans.

In addition, a real estate transfer tax is expected to generate about $450,000 of additional revenue for the village’s water and sewer fund each year. Village officials are touting the many benefits of Lake Michigan water.

They said that Lake Michigan water provides a sustainable water source. In addition, Lake Michigan water provides soft water that allows users to dispose of water softeners and filters and that it causes minimal mineral buildup on plumbing and appliances, officials said.