CITY COUNCIL AGENDA ITEM
ACTION REQUESTED:
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Pass the ordinance authorizing participation in the IEPA’s Public Water Supply Loan Program for a 30-year loan in an amount not to exceed $3,500,000 for lead water service line removal
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DEPARTMENT: Water Utilities
SUBMITTED BY: Darrell Blenniss, Director of Water Utilities
BOARD/COMMISSION REVIEW:
N/A
BACKGROUND:
To continue providing high-quality, reliable, and critical services that meet all state and federal regulations the Water Utilities must remove all lead water services lines by 2035. Traditionally, these lead lines have been removed through a combination of the Lead Rebate Program, water main replacement work, and the Lead Service Line Replacement Program. The Lead Service Line Replacement Program has replaced 150 lead services between 2024 and 2025, leaving roughly 230 lines remaining.
The 2024 rate study identified the use of cash, system revenue, and debt service as funding sources for department services and the capital program for the next five years. The first two years of lead service line replacement work has been funded solely by rate revenue. However, changes to rules governing the Illinois EPA’s Public Water Supply Loan Program (PWSLP), namely an interest rate of zero percent on loans involving lead service line replacement, make the PWSLP an attractive option for funding remaining lead service line removals.
Water Utilities had previously applied for, and received, planning approval from the Illinois EPA for a state revolving fund loan in 2023 but decided against proceeding due to an unfavorable interest rate and the cost of compliance with loan terms. With the changes to the PWSLP, Water Utilities re-started the project application in 2025 and received a $3.5 million allocation.
DISCUSSION:
The City has an opportunity to participate in the Public Water Supply Loan Program with interest forgiveness. These are favorable loan terms, and the use of debt is consistent with the long-range financial plan used in determining the recent rates through 2027. Passage of this ordinance is necessary for participation in the program.
The loan approval is for a maximum amount of $3.5 million for a term of up to 30 years. Current engineering estimates suggest this amount is sufficient to remove the remaining lead service lines in Naperville. Should bid pricing exceed the loan amount, the City would need to pledge other financing sources towards the project.
The bid for lead service removals will be reviewed by City Council for approval at a future City Council meeting. Should the bid be approved, the Loan Agreement would be finalized and executed by the City and submitted to the Illinois EPA.
FISCAL IMPACT:
Annual loan repayments of approximately $117,000 will be paid through system revenues. The use of debt was considered in the financing plan for the Water Utilities’ capital improvement program. Therefore, no adjustments to the existing rate schedule are needed at this time. The terms of the IEPA loan are favorable when compared to alternative debt financing instruments, such as general obligation and revenue bonds.