Western Springs, IL Case Study
Customer since 2018 | Population: 13,000
- Backlog of aging infrastructure
- Illinois EPA Lead & Copper Rule
- Complex Excel-based rate models
- Many years without rate adjustments
- Difficulties effectively communicating process and needs to stakeholders
RESULTS & BENEFITS
- Comprehensive capital improvement plan
- 25+ year financial forecasting model
- Integrated planning between Finance and Public Works
- Better communication facilitated by visualizing key data and recommendations
- Small, incremental rate increases
The Village of Western Springs is a Chicago suburb of approximately 14,000 people. Like many municipalities in the Chicago area, it was established around the turn of the 20th century, with infrastructure just as old. Between updating aging infrastructure, difficulties communicating needs to stakeholders, and establishing sufficient rates, they needed to find a solution that could ensure the Village provided satisfactory services, while managing multiple infrastructure priorities. Matthew Supert has been the Director of Municipal Services since 2011, and John Mastandona, Assistant Director of Finance, started in 2019. Together, the pair explain how the Village has created a plan to address these concerns and sustainably fund infrastructure improvements.
ONE PROJECT DOWN, MANY TO GO
In 2011, Western Springs underwent a potable water treatment plant upgrade — the largest single capital improvement project that the Village had ever undertaken to date. This was significant since, unlike many other nearby communities, the Village was not on Lake Michigan water, and this further invested the Village in well water as its source. The $8.5 million project was financed through an Illinois EPA state revolving loan. The project provided a needed improvement to one of the Village’s key pieces of infrastructure, but it was not the final project in the Village’s capital improvement program, rather it was the first. “One of the things I think we realized is a lot of residents were under the impression or thought, ‘Oh, yeah. They rehabilitated the water treatment plant. We’re done. We’re wiping our hands of it and everything’s going to be great,’” Supert recounts. In reality, it was just the start of improvements to better serve the Village and its ratepayers.
With approximately 60% of the Village’s water mains being 90 years or older, the need for replacement started to become unavoidable. “We had quite a number of water main breaks, water loss was a problem, all sorts of things that compounded really between 2013 up to 2020. That’s when we started the process of trying to look at how do we identify this process a little bit better and figure out what are the actual costs associated with running the water utility as opposed to just operational costs,” Supert says.
Big capital projects take up time and resources, including revenue from rates, which had gone through a period of stagnation during the treatment plant project. “Because we had the major renovation to our water treatment plant that occurred around 2011, we put a hold on any sort of rate increases or other major capital improvements for that two-to-three-year period. We focused all our efforts on that water treatment plant process… It had probably been at least five to eight years since we had done a major water rate adjustment,” Supert describes. This backlog of aged water mains meant increased funding needs which could put upward pressure on rates.
Western Springs' old water tower was built in 1892, an original part of the increasingly aging water system
TRYING TO DO A LOT WITH A LITTLE: THE FALL OF EXCEL
Western Springs was using Excel to analyze funding and rate increase scenarios which they found to be too finicky for what the Village wanted to take on. “We’re trying to do a lot with a little,” Mastandona comments. “Just like every municipality, we have limited resources that we’re working with and trying to plan ahead. A lot of these projects are not cheap, so something can’t just go wrong and then we have that money laying around. We had Excel sheets and were just trying to figure out one issue at a time. That was one of the big disadvantages that we saw: we were focusing on one thing and not seeing the big picture of things on top of the errors that could happen of just the manual process of Excel when you’re trying to focus on one issue.”
These complicated spreadsheets only made it harder to communicate these needs to stakeholders to justify rate increase recommendations. “People are very sensitive to rates specifically,” says Mastandona, “and you can only raise them so high until you get a pushback from individuals. Maybe this idea of using the rates to justify capital isn’t going to be enough anymore, because maybe rates are really what we have to utilize to leverage our operations.” So, raising rates seemed to be the answer. But by how much? How to keep them affordable? If not Excel, what program will they use? What other factors need to be considered? Water rates aren’t the only ball in the air, and the team needed to look at the bigger picture.
DON’T FORGET ABOUT LEAD SERVICE LINES
In addition to upgrading aging infrastructure, the Village was impacted by the Illinois EPA Lead and Copper regulations that went into effect on January 1st, 2022. “Part of the issue is we don’t know exactly how many lead services we have underground,” describes Supert. “We’re classified as a small utility based on our population size. We have a couple more years before we have to have comprehensive replacement plan finalized, but in terms of finding lead service lines and what we have to do with them, that does go into effect in 2022. So that will potentially be a huge cost impact for us for lines that are disturbed due to contruction or other activities.” Like other Illinois communities, they will likely have some lead lines, but how many? It’s difficult to predict, and difficult to do in Excel.
Now knowing the magnitude of their pain points, what wasn’t working, and what they wanted as an end goal, both Mastandona and Supert realized it was time to find a solution; the Village was tired of dealing with a cumbersome process that was only getting more complex as time went on and problems compounded.
FINDING THE RIGHT TOOL FOR THE JOB
The multi-faceted nature of Western Spring’s pain points made it difficult to know where to begin when it came time to looking for a catch-all solution, but the most immediate concern was funding infrastructure improvements. This meant increasing rates, which is rarely politically popular, and communicating recommendations with spreadsheets was not the most effective method. Supert and Mastandona needed their elected officials to understand the long-term negative outcomes of not raising rates.
They came across Waterworth and were drawn to how malleable the data was, without losing information or making it difficult to understand. By using the scenario modeling features, Supert and Mastandona were able to play around with different rate increases and different revenue outcomes. “It’s huge for us to be able to change some of the scenarios; the built-in assumptions in the system of decreased water usage, raising costs just on an annual basis, having your utilities increase X amount every single year, and seeing that play out over five, 10 years and where that’s heading… it’s a big deal,” Mastandona expressed, seeing the benefits from the financial side immediately.
Being able to model these scenarios makes the information easier to digest for municipal services too, Supert describes. “If we replaced all our infrastructure and we did a 1% replacement annually, which means we replaced our infrastructure every hundred years, it tells us how much we should be budgeting per year as a baseline. That is such a nice number I can hand out to people because they can understand that. They can say, ‘Oh, 1%. So that means we have to spend $1.8 million a year at a minimum to just replace it in a hundred years.’” (To learn more about this concept of Annual Cost of Sustainable Ownership, see Waterworth’s white paper Funding Infrastructure Renewal for the Long Term.)
There’s also the added benefit of the data being very visually driven, meaning it’s easy for council and stakeholders to understand information. “The main [Waterworth] dashboard graph of your cash position is also so telling. I feel like it’s hard for a lot of trustees… if they see an Excel worksheet, on line ‘B12’ they see six years out that we’re in a negative cash position or something… That doesn’t resonate quite as much as I feel like seeing the graph decreasing at year eight or nine or 10 or something like that. They’re visual people.”
“There’s normally not an appetite for raising any type of rates,” Mastandona adds, a sentiment shared by many utility managers across the country. “I think that is how we have found Waterworth to be valuable: showing our elected officials the scenarios of if we don’t do anything, if we do something, and having those changes side by side. Comparing scenarios side by side to be able to show them five years from now, 10 years from now, what the fund is going to look like.”
THE RESULT: INTEGRATED PLANNING BETWEEN PUBLIC WORKS AND FINANCE
This proved to be successful, and the Village implemented a $2.00 rate increase in 2019, bringing the combined water/sewer rate to $14.00 per 1,000 gallons in addition to implementing a $2.50 capital improvement fee to address capital needs. The Village has since begun the process of completing a comprehensive infrastructure study which will begin in 2022. “I think the bigger gaps in the rate is something we’re trying to fix, the longer amount of time in between, I think a continuous smaller amount we are seeing might be more advantageous in the system and people’s will for it.”
To them, this is where Waterworth stood out: it wasn’t limited to just solving rates, but could also tackle loans and funding, as well as hypothetical scenarios over a 25 year+ horizon. “We’ve done quite a bit of extensive infrastructure improvements over the past five years, and we put all of those improvements into Waterworth, including the debt financing component of it. Having that repayment reflected in Waterworth on the expense side is very useful to let us know where our overall cash position is, in terms of financing in and out.” Supert described.
The Village feels much more secure about the financial sustainability of its utilities, especially with Waterworth’s professional support on its side. “Dealing with financials is difficult, especially for non-financial people, so there’s always a little bit of a struggle with that,” says Supert. “Once the Waterworth team walked me through it though, it’s very straightforward. Having them check in with us a few times a year keeps us on top of it. That’s something you obviously wouldn’t get if you were just doing it with an internal tool, because you might have a staff member who leaves and maybe they were the person who really knew it intimately,” Supert acknowledges, with Mastandona – the finance expert – enthusiastically agreeing: “Especially on the finance side, the tools that are built into Waterworth allows you to do almost anything you could think of. Waterworth has saved a considerable amount of time, and probably what’s more valuable is that we know that there are no errors.”