History and Background on the DuPage Water Commission
(Or “How the DWC Blew a $100 million Reserve in Two Years”)
1. In 1984 a state law created the DuPage Water Commission (DWC) to bring Lake Michigan Water to DuPage County. Commissioners were appointed by municipalities and the county 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 far exceeded the bond payments of $13 million per year (last payment: March 2011). By 2009 DWC had 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 DWC was able to reimburse Charter Members everything 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. Even so, DWC reduced rates, ran operating losses…and still had a budget surplus each year!
6. By 2007 when DuPage got involved, DWC was running a $17 million loss from operations, giving away water to the Charter Members at below cost and using the sales tax from all of DuPage to balance their books and add to a huge reserve of $100
7. It was clear that DWC no longer needed the sales tax, which generated about $34 million per year.
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. 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 could keep the sales tax by:
--Passing yet another rate decrease to reduce the reserve by generating larger operating losses
[Note: Most Charter Members did not pass the rate reduction on to their own residents.
Rates paid by the Charter Members decreased 36% from 1993 to 2008, but residential rates
increased an average of 18% as towns used water income to balance their own budgets.]
-- 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. By not earmarking the surplus to pay off the bond, further discounting a water 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 (est)
12. 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.
13. By 2009 DWC was OUT OF CASH and needed to take out loans to pay bills. At the November 2009 DWC meeting, it was publicly acknowledged that the Commissioners had no idea where the last $20 million of the reserve went.
14. 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 what was called a “budget snafu.”
15. In 2010, before being elected County Chairman, then Senator Dan Cronin got state legislation passed that
required all Commissioners to resign and enacted a sunset on the DWC sales tax in 2016...8 years and
$250 million later than it could have been eliminated had they followed DuPage United
recommendations in 2007. DuPage United leaders testified in Springfield in support of that bill.
16. By the end of 2014, the new DWC Commissioners, some of whom were given an orientation to
problems at DWC by DuPage United leaders, had paid off all loans and bonds, were operating
DWC without losses and were on track to eliminate the sales tax as mandated in 2016.
* 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