JAWA takes another hit; bank bails out
By Susan DeMar lafferty email@example.com July 22, 2014 5:18PM
Updated: August 24, 2014 6:37AM
The South Suburban Joint Area Water Agency suffered another setback last week, when its bank informed it to find another lender.
PNC Bank, which held the letter of credit to back up the $5.5 million bonds that the agency issued in 2012, told JAWA that it has 90 days to find a new bank and cannot spend any money until then, except for current bills.
Seven south suburbs — Harvey, Markham, Blue Island, Alsip, Midlothian, Robbins and Calumet Park — sold bonds to finance engineering and feasibility studies to create their own Lake Michigan water distribution system from Hammond to free them from Chicago’s rising water rates.
The bank’s action is not a reflection on the agency, but PNC typically does not get involved in large municipal projects and it expressed concerns about recent news about Harvey’s severe financial issues, attorney Mike Stillman said during the July 17 board meeting. JAWA has $2.9 million remaining in bond funds, he said.
Harvey, which makes up 39 percent of JAWA’s water users, faces charges of financial fraud from the U.S. Securities and Exchange Commission for alleged misuse of millions in bond proceeds for a hotel redevelopment project that went nowhere. Also accused in the alleged fraud scheme is Harvey’s city comptroller, Joseph Letke, one of JAWA’s financial advisors.
Harvey is also about $23 million in arrears to Chicago for being supplied with lake water.
Calumet Park has withdrawn from JAWA, citing concerns about the water project’s viability, and Blue Island and Midlothian are considering pulling out, saying they do not want to spend more money for additional engineering work.
With only four of its six members in attendance at the July 17 meeting, the JAWA board voted 2-2 and failed to pass a motion to proceed with that extra engineering work, soil borings in Lake Michigan, that must be done during the summer. If it is delayed another year, it could jeopardize the tentative agreement JAWA has reached, but not yet approved, with Hammond, agency officials said.
Alsip and Markham supported going ahead with the work, but Midlothian and Blue Island representatives said no. Harvey and Robbins representatives did not attend the meeting.
Despite the setbacks, Alsip Mayor Patrick Kitching said JAWA has “risen from the ashes before, like a phoenix.” The vote on proceeding with the soil borings could come up again if more members attend the July 31 meeting, he said.
Even though he’s “disappointed” with the latest obstacles, “like a good soldier, I am willing to fight to the death. I will stand up for my citizens and my businesses to the bitter end. I’m not backing off,” Kitching said.
He said it took a long time to achieve a 50-year water supply deal with Hammond, and now that it’s time for JAWA’s members to sign it, “people are balking at following through. It doesn’t make any sense. It’s just a shame.”
“If the bank is pulling out and representatives are not here, you do not have the support to continue with this,” Calumet Park resident Nell McClendon told the board last week. “It’s time to listen to the citizens because you are spending our money.”
“(JAWA is) a wonderful concept, but every step has been a misstep,” Blue Island resident Carol DiPace said at the meeting. “It’s a money distribution system, not a water distribution system.”