Decision day nears for towns that want water via Hammond
BY SUSAN DEMAR LAFFERTY email@example.com July 7, 2014 9:50PM
Several pumps bring in water to Oak Lawn from Chicago at the Elmore J. Harker Pumping Station, Thursday, December 5th, 2013, in Oak Lawn. | Gary Middendorf~For Sun-Times Media
Updated: August 9, 2014 6:02AM
If south suburban towns are serious about their goal of gaining independence from Chicago’s rising water rates, it’s time to put their money where their faucet is.
After three years of planning, members of the South Suburban Joint Area Water Agency are expected to decide within the next few weeks whether to make a long-term commitment to a $300 million project to install a new pipeline to get Lake Michigan water from Hammond, which consultants say will provide much lower water rates in the future.
“This is historic. This is visionary,” said Michael Stillman, attorney for the South Suburban Joint Area Water Agency. “This is not a deal for today but for generations in perpetuity.”
SSJAWA’s legal, financial and engineering consultants are confident they can deliver a water system that — once it is paid off in 33 years — will offer customers water for less than half of what Chicago’s customers will be paying.
The towns of Harvey, Alsip, Blue Island, Robbins, Midlothian, Markham and Calumet Park previously issued a $5.5 million bond issue, of which $2.9 million remains. (Calumet Park recently dropped out of the agency, and will still pay its $210,000 share.)
More money now is needed to make the project more than a pipe dream.
Within the next few weeks, consultants need to know who is on board, and who is willing to secure an additional $3 million in bonds and sign an agreement with Hammond as the water source.
There is an immense amount of work to be done over the next 15 months and more money is needed for design engineering, a $1 million payment of “earnest money” to Hammond, legal and financial fees and property acquisition. Soil borings have to be done in the lake this summer, or the project will have to be put off another year.
Asking for more money could be a tough sell, as the political winds have changed since the agency was formed. New mayors have come on board in a few of these towns, including Blue Island Mayor Domingo Vargas.
“The city will not commit any more money,” said Vargas, adding that he is “still waiting” for information on engineering and water costs to his citizens. “It’s coming to a point where we might have to move on.”
Vargas said he has no other alternative and will just have to “bite the bullet” and pay Chicago’s rates.
Blue Island’s share of the $5.5 million bond issue is $570,000, and if the additional $3.5 million bond is issued, that figure would increase to $943,228.
According to SSJAWA’s figures, Blue Island will save $1.5 million within five years and a total of $106.9 million in 40 years.
The city of Markham — the first to join the agency — remains committed.
“There’s no use waiting till the well runs dry. In the long run, this will be beneficial to the south suburbs,” said Markham Ald. Clifton Howard, who serves as an alternate on the SSJAWA board. “The key here is to have vision. I need to think of the future.
“If you analyze it, it’s a good deal. Let’s do it,” he said.
There also is concern about Harvey’s financial viability, and it represents nearly 40 percent of the cost, which is based on the number of water users. Harvey also sells water to Homewood, Flossmoor, Hazel Crest and East Hazel Crest.
According to Chicago’s Department of Water Management, Harvey is $23 million in arrears on its water bills.
As an added financial security measure, the water agreement stipulates that SSJAWA’s water users will make their payments directly to a third party, not the individual municipality.
Last week, the U.S. Securities and Exchange Commission charged the city of Harvey and its comptroller, Joseph Letke, with fraud for taking at least $1.7 million in bond proceeds for the development of a Holiday Inn and using it for operational costs such as payroll. A federal judge has prohibited Harvey from issuing or selling any more bonds until Monday.
SSJAWA’s bond issue was not affected by this, Stillman said.
The action against Harvey “is certainly something that the agency will review and discuss at its next meeting and see how it affects the future of our agency,” he said.
Despite setbacks, the team of consultants believes that creating this new water system is the right thing to do for future generations.
They acknowledge that their critics are correct in saying the project has taken some time to accomplish.
“No water deal happens overnight,” Stillman said.
It took about 10 years for Mokena and New Lenox to analyze, engineer, negotiate agreements and build a pipeline system from Tinley Park, served by Oak Lawn, according to Mokena village administrator John Downs. Planning started in 1989 and water was delivered to Mokena in 2002.
“Any time you are dealing with multiple governments, laying new infrastructure over a long distance and acquiring land and easements, it takes an incredible amount of time,” Downs said, adding that the project has been “a good thing for our town.”
The Northern Will County Water Agency, formed in December 2011, with Bolingbrook, Homer Glen, Lemont, Woodridge and Romeoville, has been tied up in an eminent domain court battle to take over pipelines owned by the private water company American Lake Water.
Northern suburbs also are looking to create their own system, said Aaron Fundich, of Robinson Engineering.
In the three years that JAWA has pursued its water independence, “We have not been sitting on our hands,” said Dan Donahue, of JDSS, LLC.
Consultants worked for free for the first 18 months while the agency got off the ground.
Chicago refused to sell them raw water, so they initially turned to Whiting.
They have now reached a deal with Hammond that fixes SSJAWA’s costs for a minimum of 50 years.
But Hammond also needed an “incentive,” said financial advisor David Schutter, of the Public Funding Group.
Hammond wanted these towns as its own customers but finally agreed to let them buy raw water. It will provide the agency with access to the lake, waive its permit fees, grant city rights-of-way, and cooperate with the project. Hammond is prohibited from negotiating with agency members or customers for 24 months.
SSJAWA plans to pursue low-interest loans from the Illinois Environmental Protection Agency and issue revenue bonds in 2015 to finance the project, which includes construction of a water treatment plant and installation of 15 miles of water main.
After 33 years, once the bonds are paid off, Hammond is allowed to double the amount it charges SSJAWA for raw water, but the total rate is expected to drop significantly then because the bonds will be paid off.
According to their numbers, Chicago’s wholesale cost of water to its customers in 2051 will be $10.61 per 1,000 gallons, and SSJAWA’s will be $3.25 — and these are conservative numbers, consultants said.
In 2019, SSJAWA’s first full year of operation, towns will have saved $67,000. In 40 years, their figures show a cumulative savings of $1 billion.
The average homeowner will save $14.35 the first year, but by the 34th year, when the financing term has ended, homeowners could save $650 annually compared with Chicago’s rates, according to SSJAWA’s numbers.
Their figures are based on Chicago raising its rates annually by 3 percent.