The city of Yorkville approved another $35 million debt certificate even though its federal loan officially closed to help cover the $224.4 million Lake Michigan sourcing project.
The City Council’s approval of another “bridge loan” follows in the wake of an approved $35 million debt certificate in July and a $50 million debt certificate in February.
City Finance Director Rob Fredrickson said the bridge loans will not add to the project’s total cost, but will diversify how the city can pay its bills to the DuPage Water Commission, which is in charge of the pipeline extension project.
The city received good news on the federal loan front; the $170 million loan from the U.S. Environmental Protection Agency Water Infrastructure Finance and Innovation Act program officially closed on Sept. 3. It received final approval from the Office of Management and Budget after being held up for nine months due to federal staffing shortages and slowdowns.
While the money was tied up, the city approved bridge loans to ensure the bills could be paid and the construction was not delayed. All the necessary infrastructure, including extending pipelines, erecting water towers, and new water receiving stations, must be completed by the end of 2027. The first Lake Michigan water coming down the pipeline is expected in the summer of 2028.
While the WIFIA loan will serve as the city’s primary long-term funding source, the new $35 million BMO financing will provide “flexibility during the remaining construction period.” The bridge loans are covered by the city, not from new property tax levies, but from already available city funds.
Yorkville Mayor John Purcell said that while the construction is still far from completion, the final bid is coming in soon and it is “looking to be around original estimates.” The bid could be one of the last major hurdles that could drive up the project’s costs.
The near $400 million Lake Michigan water sourcing project will provide more expensive water to Yorkville, Oswego and Montgomery. Pictured, crews dig-in and replace water mains on Book Road in Naperville, where the project begins.
Given the construction schedule and work already completed and funded, the city expects this bridge loan to be the last short-term financing solution sought by the city, according to city documents.
Fredrickson said access to the BMO financing in the short-term will “provide additional liquidity should there be delays associated with reimbursement documentation or review, timing of federal disbursements, disruptions at the federal level, or other unforeseen circumstances.”
He said the city does not need to draw out the full $35 million, but rather can withdraw the money as needed to cover the project’s costs over two years.
The new bridge loan does slightly differ from the July loan in that it carries a 9% maximum authorized interest rate compared to the earlier bridge loan’s 5% rate, according to city documents.
The city is only responsible for covering the 9% interest on the amount of the $35 million actually withdrawn for the project. The city is currently projecting that only $10 million of the $35 million loan may be actually withdrawn for the project.
About $400 million in costs are being shared by Yorkville, Oswego, and Montgomery to extend pipes to water mains near Naperville carrying Lake Michigan water. The pipes are operated by the DuPage Water Commission.
Outside of the original $170 million WIFIA loan, the city was planning on covering its remaining costs through the “city’s bond issuance and loan proceeds.”
To help cover these costs, the city recently approved 20% annual water rates over each of the next five years. Average residential water bills are expected to double by 2030 to help cover the project’s costs.
