With Lake Michigan water expected to be rushing down the pipes to Yorkville residents‘ homes in two years, the federal low-interest loan the city is primarily using to cover the project’s $224.4 million is “stuck in limbo.”

City officials said the city’s $170 million loan from the U.S. Environmental Protection Agency Water Infrastructure Finance and Innovation Act (WIFIA) program has been delayed due to federal staffing shortages and slowdowns.

City Administrator Bart Olson said EPA staff told the city all federal loads nationally have been impacted by the slowdowns.

The city was originally intending to close on the WIFIA loan last fall.

The Lake Michigan water sourcing project is a joint venture between Yorkville, Oswego, and Montgomery, sharing the costs to extend their pipes and connect to exist water mains near Naperville, owned by the DuPage Water Commission.

The total project is currently running around $400 million. A groundbreaking ceremony for the project was held at Oswego East High School on June 10.

Lake Michigan water is expected to be online for Yorkville by the summer of 2028. Montgomery should receive water by 2030.

“If for some reason the bills come due from the DuPage Water Commission and the WIFIA loan is not yet approved, there is a chance down the road we would have to issue municipal bonds to pay for the project,” Olson said during the June 9 City Council meeting.

Olson said the city’s WIFIA loan has already been signed by the EPA and is currently “being reviewed by different federal agencies.” The EPA has not currently provided the city a closing date.

Olson said Yorkville’s loan is weeks ahead of both Oswego’s and Montgomery’s, but all communities are now “in the same boat.”

The first bills due from the city to the DuPage Water Commission will be after this summer, according to city documents.

Olson said EPA staff indicated they were impacted by the shutdowns, being short-staffed, and are behind on a backlog of work. The EPA told the city it had to respond to active incidents across the county that drew staff away.

With construction crews making their way across Kendall County, there are still three bid construction packages to be opened for different phases of the overall project. While the first phase bidding came in almost $100 million over initial projections, Olson said recent bids “have been favorable.”

While the city is still planning on using WIFIA loans to pay for the majority of the project, Olson said staff wants to remain flexible in funding options in-case the delays continue.

The City Council recently approved a reimbursement resolution that Olson called “a backup plan for the city” should the WIFIA loan delay extend past the first bills due. The resolution permits a ceiling of $225 million, though city staff said any future bond issuance “would likely be substantially less.”

The resolution enables the city to reimburse itself for previously incurred project costs within 60 days of the resolution passage. Olson said this would be necessary if the city must pivot “in-full or in-part” from a WIFIA loan to a municipal bond or line of credit to finance the project.

The reimbursements would include a string of water improvement construction work totaling around $1 million that was completed in April. The resolution allows the city to finance at a later date if municipal bonds are deemed necessary.

“This (resolution) provides us some flexibility in future bonding if we need to,” Olson said. “And if we decide never to issue a bond, then this ordinance has done no harm, doesn’t cost us anything, and has no impact whatsoever.”

The passed resolution does not obligate the city to issue any bonds or to incur additional debt.

Any future bond issuance would be “alternative funding source” not additional debt for the project, according to city documents. This means whatever bonds would be issued to finance a portion of the project, the WIFIA loans would “be reduced accordingly.”

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 aimed to double by 2030 to help cover the project’s costs.

In the wake of some construction bids coming back higher than expected, Olson said the city might consider larger water rate increases if the project’s costs balloon.

The WIFIA loan currently has a 35-year payback from the time of substantial completion, which will take it through 2065. Yorkville must cover 145% of the WIFIA loan debt and the 3.5% interest rate to meet the obligations of the loan.

The Lake Michigan water project was deemed necessary to provide the region’s growing population a more reliable source of water because the currently used underground aquifer is being depleted at an unsustainable rate.