The Oswego Village Board is looking at alternate financing options for water and sewer infrastructure improvements as part of the village’s switch to Lake Michigan water.
“The financing plan is still fluid and being adjusted as project costs are finalized,” Oswego Finance Director Andrea Lamberg said in a recent report to trustees.
No formal action has been taken yet concerning the financing options.
Oswego, Yorkville and Montgomery decided in mid-December 2021 to change from relying on well water to Lake Michigan water via a connection through the DuPage Water Commission.
The Illinois State Water Survey has used projections showing the region could run out of ground water from the aquifer it currently uses in the next 20 to 40 years.
The planning process between the three municipalities on the water issue began in 2014.
The purpose of a recent discussion concerning financing pertains to an “unexpected delay” in federal funds, Lamberg said in the report.
Oswego approved a contract for the purchase and sale of water with the DuPage Water Commission a year ago. The agreement states the DuPage Water Commission will construct, own and maintain the transmission mains necessary to deliver water to Oswego, Montgomery and Yorkville.
Through an agreement with Yorkville and Montgomery, Oswego will pay 35.36% of the cost of the mains, Lamberg said in the report.
“Oswego’s estimated share of the total owed to the DuPage Water Commission is $127,107,352 for construction and $11,047,790 for the buy-in,” Lamberg said.
To date, the village has received funding for the project through general obligation bonds and an interim promissory note, Lamberg said.
The village plans to pay off the promissory note and fund remaining costs through a federal loan from the Water Infrastructure Finance and Innovation Act program and additional interim financing, officials said. The maximum amount the village can borrow through the program is $102.6 million. The remaining funding would come from cash reserves through the water and sewer fund and 2025 and 2026 bond issuances as well as interim financing, Lamberg told trustees.
“The overall funding plan for the village’s connection to Lake Michigan originally assumed a 2025 bond issuance, followed by the WIFIA loan closing in 2025. It was assumed draws would be made on the WIFIA loan, then a final bond issuance would occur in 2026 for remaining financing needs,” Lamberg said.
“Due to the unexpected delay of the WIFIA loan approval, alternate financing scenarios were created to determine the best course of action,” she said.
Aside from the timing of the WIFIA loan approval are changing interest rates, she said.
Several projects related to the connection to Lake Michigan water have either been completed, are in progress or are included in the village’s capital improvement plan, Lamberg said. For example, the Main Street water main replacement project is in progress and scheduled for completion in 2027, officials said.
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A promissory note was taken out in early 2026 to bridge a funding gap for the water project.
“This turned out to be a positive financing move due to the favorable rate received from Byline Bank of 4.25%, which was lower than the WIFIA rate of 5% or general obligation bond rates at that time of 4.35%,” Lamberg said.
The village is once again seeking interim financing for the project for late 2026, Lamberg said. The rates on interim financing continue to be more favorable than rates for other options, she said.
“With the WIFIA loan not being closed yet, we are looking for additional interim financing. Given the current interest rate environment, it turns out the interim financing isn’t a Band-Aid but actually an effective financing tool for the village. We are borrowing at a rate much lower than had the WIFIA loan already closed or if the WIFIA loan would close now,” Lamberg told trustees.
The village is currently working with banks on the financing to get interim rates for a longer period of time of three to five years. The first interim financing loan was for one year, she said.
The village is still operating with the assumption the WIFIA loan will close this year or early 2027, the finance director said.
“We are sure it will happen. It’s just a matter of when,” Lamberg said. “But if something out of the ordinary would occur and the WIFIA loan does not close, there are options with general obligation bonds. I do want to assure the board the WIFIA loan is not the only option.”
However, there are components of the federal loan that are attractive, including flexibility and no penalties to pay off the loan earlier, she said.
Aside from some land acquisition, the overall project timeline remains on schedule for the summer of 2028, village officials said.
Yorkville’s WIFIA loan was released last month, Oswego Village Administrator Dan Di Santo said.
“That’s good news for us,” he said.
There are 76 WIFIA loans in process in various states, Di Santo said. Oswego and Montgomery are in the “applied” status, he said.
“We’re hopeful that the Yorkville approval means we are coming up soon,” Di Santo said.
Linda Girardi is a freelance reporter for The Beacon-News.