Oswego is looking at the feasibility of a real estate transfer fee to help partially offset future water rate increases in the village due to bringing Lake Michigan water to town.
Village trustees as a committee-of-the-whole recently discussed adding an extra fee on the closing of new homes as a way to provide funding for the costs of Oswego bringing in Lake Michigan drinking water through a connection with the DuPage Water Commission.
Oswego, Yorkville and Montgomery in December decided to go with Lake Michigan water via the commission after years of studies and analysis.
Oswego’s share for switching to Lake Michigan water is estimated at $75 million. Due to that cost, “water rates will go up,” Oswego Village President Troy Parlier has said.
However, Parlier has requested village staff to identify alternative revenue sources to ease any water rate hike, including a real estate transfer fee that could be added to real estate closings on new residential construction.
“This basically becomes a closing cost added to new home purchases in Oswego,” Parlier said in his recent State of the Village address.
The revenue generated from a real estate transfer fee would be directed to the village’s water fund, he said.
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The new fee would have to be approved by voters in a referendum before it could take effect, he said.
Staff reviewed statutory sources of municipal revenue that include more than 70 different revenue sources, Oswego Finance Director Mark Horton told trustees.
“We looked at 78 different revenue sources to determine which ones would be available to the village but specifically which ones would be available to the village for funding water projects and to be paid by new residents coming into the village,” Horton said. “There are not too many that meet the criteria.”
The real estate transfer fee is a revenue source that has the potential to generate an estimated $1 million annually based on 2021 data, Horton said.
“We looked back on all sales in the past 12 months and with the volume of sales there is the possibility the transfer fee would generate an estimated $950,000 to $1 million,” Horton said.
It’s a fairly decent revenue source, he added.
“It can generate a substantial amount of revenue and has the opportunity to grow as the village grows,” Horton said.
The village could rebate the tax to Oswego residents moving from one Oswego location to another spot in town. However, such rebates would lower the amount of revenue coming in, Horton said.
The village is looking into 30-year loans available through the DuPage Water Commission as part of the funding for the water project. The amount of the loans is “in negotiation,” Oswego Village Administrator Dan Di Santo told trustees. The village is looking at federal low-interest loans as well, he said.
Trustee James Marter was supportive of generating revenues through a real estate transfer fee.
“It’s a good-sized number to bring in as far as revenue,” Marter said.
Municipalities that have real estate transfer fees include Aurora, Naperville and Joliet, according to a staff report.
Linda Girardi is a freelance reporter for The Beacon-News.