Water Affordability in Illinois

In 2021, the Illinois General Assembly commissioned the Government Finance Research Center (GFRC) at the University of Illinois Chicago (UIC) to produce a “Water Rate Setting Study.” This three-year project led to the release of a series of deliverables including reports, papers, datasets, presentations, and other dissemination products, that can all be found on the   GFRC website  . The study examined:

• The components of a water bill
• Reasons for increases in water rates
• The definition of affordability throughout the State and any variances to that definition
• Evidence of rate-setting that utilizes inappropriate practices
• The extent to which State or local policies drive cost increases or variations in rate-settings
• Challenges within economically disadvantaged communities in setting water rates
• Opportunities for increased intergovernmental coordination for setting equitable water rates

This webpage overviews the study's findings focused on water affordability metrics.

Municipalities set water rates according to locality-specific factors including water source, infrastructure needs, and debt service requirements, among other factors. Where infrastructure, water scarcity, or treatment costs are high, sustainable water pricing is difficult for municipalities to achieve, as lower-income households may be unable to absorb rate increases essential for the system's financial viability. This challenge is particularly acute for small, rural systems, where shrinking populations must support relatively fixed operational and infrastructure costs, often amidst higher poverty levels. The most commonly used threshold for affordability at the household level is whether a water bill is less than 2.5% of MHI. This metric was initially developed by the EPA for small water systems (<10,000 people served).

Given the variation in rate structures across Illinois municipalities, the GFRC researchers use a standardized water bill for analysis. This bill reflects what residents would pay for 5,000 gallons per month. The following maps present that standardized bill as a percentage of both the median household income (left) and income at the bottom 20th percentile of each municipality (right). Highlighted in red are the municipalities for which that standardized water bill is above the EPA threshold of affordability of 2.5% of a household's income.

• There are only four municipalities in Illinois with standardized water bills above the affordability threshold at the median household income level
• There are 136 municipalities in Illinois with standardized water bills above the affordability threshold at the bottom quintile income level
• Only 14 of those 136 municipalities are in the Northeastern region
• All 14 Northeastern municipalities above the affordability threshold form an inner ring of suburbs around Chicago
• The municipality with the greatest affordability burden is Robbins, with the standardized water bill costing 11.3% of total income at the bottom quintile level and 3.92% at the median household income level

To download data, learn about data sources, access the data dictionary, and much more, visit the   GFRC website  . For questions, please email    gfrc@uic.edu  .