1980-04-23 - Village Board Special Meeting - Minutes 5666
4/29/80
MINUTES OF THE SPECIAL MEETING OF THE
VILLAGE BOARD OF THE VILLAGE OF BUFFALO
GROVE, ILLINOIS, HELD IN THE COUNCIL CHAMBERS,
VILLAGE HALL, APRIL 29 , 1980.
President Clayton called the meeting to order at 7:05 P.M. CALL TO ORDER
Roll call indicated the following present: President Clayton; ROLL CALL
Trustees Marienthal , O'Reilly, Hartstein, Kavitt, Gerschefske.
�./ Trustee Stone was absent. Also present were: William Balling,
Village Manager; William Raysa; Village Attorney; William
Sommer; Assistant Village Manager; William Brimm, Finance
Director; Gregory Boysen, Director of Public Works; Richard
Kuenkler, Village Engineer.
Mr. Brimm read Warrant #426. Moved by O'Reilly, seconded by WARRANT #426
Gerschefske, to approve Warrant #426 in the amount of
$108,621 .47 authorizing payment of bills listed. Upon roll
call , Trustees voted as follows:
AYES: 5 - Marienthal , O 'Reilly, Hartstein, Kavitt, Gerschefske
NAYES : 0 - None
ABSENT: 1 - Stone
Motion declared carried.
President Clayton introduced Mr. James Soyka, Chairman of D.M.A.P. LAKE
D.M.A.P. Mr. Soyka thanked the Board for inviting represent- MICHIGAN WATER
atives of D.M.A.P. to give their proposal tonight. He then SUPPLY PROPOSAL
introduced Sue Harmon with the law firm of Ross , Hardies,
O 'Keefe, Babcock & Parsons; DuWayne Feurer, also an attorney
with the above firm, whose specialty is utility rates; Cliff
Weaver, attorney for D.M.A.P. ; and John Callan with the engineering
firm of Consoer, Townsend & Associates .
Mr. Weaver pointed out that the Village has been given proposed
contracts with the City of Evanston and the City of Chicago.
Trustees have also received an updated engineering report , and
a formal recommendation from the Commission. Mr. Weaver stated
that the D.M.A.P. Commission would welcome Buffalo Grove as a
full member. Specific recommendations by the Commission are
contained in the blue volume which they distributed. It is the
conclusion of the Commission that the Evanston water supply
alternative is the preferred alternative. An alternate
recommendation was made to include the Chicago water supply,
should the member communities decide that is what they wish to
�./ pursue.
There has been a great deal of discussion regarding the entity
to be used in securing a regional water supply. Mr. Weaver does
not think that Venture is a legally workable structure to accomplish
what must be accomplished. He said that the Nuveen report states
that a statutory water commission is the preferred entity to be
used to accomplish the goal of a regional water supply. If a
statutory water commission is not used, there should be new legisla-
tion creating a new kind of entity. The Nuveen report lists
characteristics of that entity. Mr. Weaver sees no difference
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between these characteristics and a statutory water commission.
Mr. Weaver has conferred with Chapman and Cutler and asked them
whether any entity created by intergovernmental agreement could
issue joint bonds . Their answer was "no"; there is no pending
legislation to change this situation. Mr. Weaver stated that
to use any entity other than a statutory water commission will
require new legislation and a test case.
The secondary recommendation of D.M.A. P. is that, if all cities
�./ wish to go to the City of Chicago, there must be a vehicle. The
D.M.A.P. Commission is the logical vehicle to be expanded to do
that job.
The primary recommendation is for those communities, basically
those north of the Tollway, which by physical location and current
and projected water needs, can logically use the excess capacity
which now exists at the Evanston water plant. D.M.A.P. feels the
most logical alternative is to build a pipeline to the Evanston
plant and use that capacity. To highlight the most critical
reasons for this recommendation:
1 . Initial cost:
a. The initial cost of either system is going to be in
the same range.
b. If there is an advantage that can be discerned in either
alternative, it is an advantage to the City of Evanston
alternative if all the communities that can use that
alternative choose to do so.
D.M.A.P. sees some small benefit on initial cost with the
Evanston alternative.
2. Of much more importance to D.M.A.P. is the long-term
stability of the costs involved in the project. They
have looked carefully at the factors contributing to long-
range stability, and concluded that several of these factors
favor the Evanston alternative.
a. The mix of fixed costs and variable costs ; D.M.A.P. views
the fact that the Evanston bond issue is larger than the
Chicago bond issue as an advantage. In the Evanston
alternative, approximately 750 of the amount paid for
water coming out of the tap is attributable to fixed
capital costs which are not subject to inflation; in
Chicago, about 50% of the project is in fixed capital
�•/ costs. As inflation rises , the Chicago rate will be
affected much more rapidly than the Evanston rate.
b. With regard to the variable cost side, D.M.A.P. feels
that Evanston has the distinct advantage in being able
to hold that variable cost in line because they have
agreed to a very detailed rate formula. Chicago sees
no way that they can offer that specific type of formula
protection in its contract. D.M.A. P. feels that negotiating
and knowing in advance exactly how the rate will increase is
a distinct advantage.
3. System capacity:
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a. When looking at partial allocations , both systems have
more than ample capacity for the term of this bond issue.
b. When looking at full allocations in the immediate future,
it becomes equally clear that neither system has enough
capacity to serve all of the communities it is currently
considering serving. Evanston would require some in-plant
improvements at some point during this bond issue, basically
filter beds and pumps ; the City of Chicago would require the
construction of a new deep transmission tunnel from Lake
Michigan to O'Hare Airport.
c. The final factor grows out of the realization that neither
system is going to have the capacity to serve all of the
communities it might serve.
The two water systems being considered have excess capacity
built with old dollars. That excess capacity is available
to the Northwest suburban areas to be purchased at bargain
rates in light of today's dollars. If everyone went to
Chicago, it is clear that new dollars would have to build
new capacity, and presumably the new users would pay at
least their fair share of that. D.M.A.P. feels there is
a real regional advantage to using up the capacity we have
if there is any way possible. Beyond that , by bringing two
systems into the region, we create the possibility of, at
the very least, an emergency interconnection between these
two systems.
These recommendations judgment re resent the best of D.M.A.P.
P
The question was asked as to whether or not D.M.A.P. has a written
commitment with the City of Evanston on a sell price. Mr. Weaver
answered that they do not have a written commitment; they have
negotiated with staff what the formula will be, what will be
included in the formula, and that formula on a partial allocation
generated a rate of 18.2 . Mr. Weaver said there is no question
in his mind that they can get a written commitment for that price.
Regarding capital improvements to Evanston , Mr. Weaver stated that
Evanston is in the midst of a 13.5 million dollar bond issue over
5 years doing plant improvements totally unrelated to whether or
not D.M.A.P. takes water. Evanston has committed to D.M.A.P.
45 million gallons out of current capacity with no required
capital contribution. As to the reservoir, it is his under-
standing that , as in either proposal to Chicago, water would be
received from a reservoir.
Mr. John Callan said that the reservoir that would have to be
constructed is included in the bond issue for the project. As
far as plant capacity, when the tentative contract was negotiated,
they were looking at partial allocations. Evanston indicated that
they would set aside 45 million gallons per day. Since that time,
there is a potential that there will be full allocation. Evanston
is more than willing to negotiate again to fully review the water
requirements of the D.M.A.P. Commission based on full allocations
to see what can be done with the 45 MGD figure. D.M.A.P. feels
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confident that it can be raised, although they are not in a position
to say exactly how much. As far as required capital improvements ,
this would be somewhat dependent on whether or not full allocations
are received, and how much Evanston is willing to guarantee. The
only capital improvements which would be required would be expansion
of the filters, and basically the settling basins. The intake
structures, for the most part, are fully capable for the foreseeable
future for all of the customers in the D.M.A.P. Commission. After
the capital improvements that Evanston is undertaking now, with the
exception of the low lift pumps, the plant will have a firm capacity
of about 105 to 110 MGD. D.M.A.P. feels confident that something can
be worked out without a great deal of effort.
Regarding the point of connection for Buffalo Grove, Mr. Soyka
stated that the present plan is not cast in concrete, and could
be looked at again . Mr. Soyka stated that the D.M.A. P. Water
Commission has committed to provide a connection in Buffalo Grove
at the location chosen by the Village. Mr. Weaver stated that it
is the policy of the Commission to give Buffalo Grove, as a member,
the same quality and quantity of service for its rates as any other
member.
Discussion took place regarding the fact that Des Plaines is no
longer an active member of D.M.A. P. , and the possibility of Des
Plaines being an emergency cross connection of the Chicago water
supply. Regarding the possibility of Venture forming a water
commission such as D.M.A. P. has done, Mr. Weaver stated that the
statute provides no mechanism for withdrawal of a community, or
the withering of a Commission; therefore, there would have to be
legislation to do same. No bond buyer would be eager to buy bonds
of a second commission containing members of the old commission.
The only case in Illinois decided under the water commission statute
states that if a water commission presents a contract to sell water
to one of its members , that member is obligated to sign the contract
and take the water. Mr. Weaver stated that it is easy to expand
D.M.A.P. , but very difficult to replace it.
Mr. Weaver stated that becoming a 15 municipality commission is
essentially their alternative recommendation; in other words,
becoming the commission for the Venture system. He said that
the intent of their alternative recommendation is that, if all
municipalities decide to go one way, the D.M.A.P. Commission is
the logical vehicle, and D.M.A. P. would not resist that alternative.
Mr. Weaver stated that any municipalities not presently in D.M.A. P.
could form their own commission; the difficulties will come if
�•/ there is not a clear consensus as to everyone going one way, or
half going one way, and half going the other. The point was made
that, until a decision is made regarding a pending suit regarding
the Chicago water rate, it will not be known exactly what Chicago
rates would be to the suburbs. Mr. Weaver explained some of the
legal points in this case. Mr. Weaver stated that the way the
allocation process has worked so far is that allocations go
directly to the communities , and they may then assign them to
other people for purposes of transporting the water to them.
There is no legal or mechanical problem is dealing with that.
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Mr. Weaver stated that regarding the timetable of both systems
to getting water to the suburbs, the projected time is 1984/1985.
System capacity improvements would be made, in both cases , after
the initial system was in place. Using the Evanston approach,
the maximum number of communities to which the Evanston system
logically should grow would be Mt. Prospect , Arlington Heights ,
Palatine, Buffalo Grove, Rolling Meadows plus Wheeling. Mr.
Weaver stated that the Buffalo Grove Village Board would appoint
a commissioner to D.M.A.P. for a 5 year term.
Mr. Balling asked if D.M.A.P. was somewhat limited on how they
may allocate costs to all members . Mr. Weaver said they were
not. He said they must charge a high enough rate to make sure
they retire their bonds. They have no taxing power; they have
no general obligation bonding power; they have a very limited
right to issue revenue bonds on the condition that they charge
enough to get those back. Mr. Balling asked if D.M.A.P. had the
power to assess a variable water rate to different members. Mr.
Weaver said that he believed that they would; their policy has
always been that everyone in the commission should pay the same
rate. Everyone would pay the same per thousand gallon cost.
They would decide how many dollars they would need to meet their
obligations , how many gallons they were going to sell , and
everybody would pay the same price per gallon.
The question was asked what would happen if one member of the
commission suddenly put an increased burden on the system so as
to require additional capital improvements. Mr. Weaver said that
they would, in the contract with the community, protect themselves
from overreaching by anyone else by the initial water sale contract.
Mr. Balling as!:ed if they would guarantee, on a long-term basis , a
water allocation in an initial contract. Mr. Weaver said that they
could not give an answer at this point, except to say that it has
been their policy to do what is fair to everyone. He said this
is a very complex issue which would have to be discussed. Mr.
Weaver stated that, if the Board agrees with their recommendation
on Evanston, the sort of resolution that they feel would be
effective would state that this makes sense to Buffalo Grove and
Buffalo Grove would like others to decide that it makes sense to
them. If the Village decides that the alternative is preferable,
they would ask that, when attending the May 7th Venture meeting,
the Village answer that the sensible vehicle would seem to be the
D.M.A.P. commission.
Mr. Balling introduced Mr. Bob Hall of Metcalf & Eddy/Murphy VENTURE WATER
�/ Engineering and Mr. Dick Switec of Nuveen & Company. PROPOSAL a-�-
Mr. Hall referred to the three page report previously dis-
tributed, and highlighted it , giving a brief history of Venture.
Mr. Hall stated that, in a program like this , there are 8 tests
of feasibility which must be met :
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1 . Is the project technically feasible?
Mr. Hall said that both Venture and D.M.A.P. are technically
feasible.
2. Is it economical?
Mr. Hall said that both systems could be built within the
realm of economics as we presently know them. He said he
believes D.M.A.P. is talking in terms of $1 .05-$1 . 10 per
thousand gallons; Venture is talking in terms of $1 . 15 per
�•/ thousand gallons .
3. Can the Village bond and pay for the project?
Mr. Hall said the answer is certainly yes.
4. Is it feasible from an environmental standpoint?
Mr. Hall said that the answer here is yes.
5. Is it socially acceptable or feasible?
Mr. Hall said that having an adequate supply of quality water
could be considered socially acceptable.
6. Is it institutionally possible?
Mr. Hall said that there are institutional means of putting
such a project across .
7. Legislative.
8. Political .
Mr. Hall stated that the legislative and political questions are up
to the Trustees to institute.
Mr. Switec basically summarized the Phase II report, which generally
described alternative means of financing the transmission system. In
that report, they looked at seven different means of financing the
project. They then recommended three for further analysis. There
is a third phase report which discusses these items. The first is
an intergovernmental joint action agency; the second means is a
water commission; the third means is an industrial revenue bond.
The next aspect is single point financing; that is that , rather
than each of the Venture members coming up with his pro rata share
of the project costs, all financing should be done through one of
the above three financing entities .
Mr. Switec stated that they felt that a project of this nature
should be done with revenue bonds , rather than general obligation
bonds . They have looked into the financial feasibility of the
project, and considering the size of the communities involved,
and the credit rating or outstanding bonds of the communities,
they feel that whether the cost of water per thousand gallons is
$1 .05 or $1 .23 or anywhere in that range, there would be no
problem with water revenue bonds secured by water sales contracts.
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Ownership of the system will depend on which type of financing
entity is used. This is another aspect of the Phase III report.
The next item looked at is rate setting. They have discussed
three or four different methods of rate setting. They are not
making recommendations on this now. When the eight Venture
communities get together, they will work with them, and try to
determine the most equitable way of allocating the project costs .
One of the essential elements of a bond of this nature is that
the sale of water to Venture communities be set so a bondholder
can look to a contract with each of the individual members. There
are four elements of a contract like that that they have identified
that would be essential in order to have a bond of this nature sell .
1 . The IDOT allocations would have to run for a period
commensurate with the term of the bonds.
2 The agreement with Chicago would have to run for a similar
term.
3. The contract would have to be on a pay-for-pay basis.
4. Each of the participants would have to agree that, within their
respective municipality, they would charge rates sufficient to
operate the system and pay the principle and interest on the
bonds.
The next aspect they looked at was whether or not a bond issue like
this would have adverse affect upon the outstanding ratings of any of
the municipality 's bonds . They do not see any adverse impact on the
bond ratings or on the systems. The legal status of the contract
would be that the contract payments made by each municipality would
be an operating expense of the municipality. Those payments would
come before payments of principle and interest on the outstanding
bonds . This ties into the bond rating, but they do not feel that
this would, in any way, jeopardize the outstanding ratings on the
bonds because the rate covenants on those bonds say that a municipality
will charge rates sufficient to pay operating maintenance which would
include the cost of water to Chicago and also charge rates high
enough to pay principal and interest on those bonds.
The last thing they looked at would be the result of more than eight
municipalities joining Venture. This ties into the rate structure,
and they feel the two-tiered rate system would be the most equitable.
There is going to be a substantial amount of cost which will have to
�•/ be funded by the original eight participants . Those participants
would decide their own schedule of rates at the beginning, and also
provide means of allocating costs to late arrivals to Venture. These
late arrivals would have to pay a higher cost. They would not just
pay a hook-up fee; they would have to pay part of the capital invest-
ment.
Mr. John Yost of Keifer and Associates commented that their recom-
mendation was for the Village to join Venture.
Mr. Balling said the Village is very concerned with the reservoir
sizing on the east end of the system at Chicago.
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Mr. Hall said that one of the requirements that the city calls
on is that the suburban communities have full storage for a
maximum day. He explained the steps to be taken to this goal .
Mr. Balling asked if the construction timetable of 18 months was
realistic. Mr. Hall stated that is probably slightly unrealistic,
in that 18 months would be too short a time; the time would more
likely be 24 to 27 months .
Mr. Balling stated that the staff recommends that the Village
reaffirm its stance with the water Venture. He then highlighted
the reasons for this recommendation:
1 . Pricingis one factor of meetingBuffalo Grove 's goal .
2. Service delivery mode and system reliability and availability
of water are critical factors . System pressure is important.
Because of the disproportionate growth rate of Buffalo Grove,
staff feels the Village would be more compatible in the Venture
because there are a number of towns with the same growth rate as
Buffalo Grove, whereas Buffalo Grove would be unique in that
respect if in the D.M.A.P. Commission. Mr. Balling said nothing
should be ruled out at this point in time.
Mr. Balling stated that the recommendation is that we reaffirm the
water Venture position for Buffalo Grove; that we do so conditionally,
subject to the Public Works ' Director' s memo of April 25, 1980;
keeping in mind that the water Venture not fracture itself, in which
case there would be a totally different alternative, and one which
must be restudied.
Moved by Marienthal , seconded by O' Reilly, that the report that was
filed April 25, 1980 recommending the Venture group be pursued by
the Village President at the Venture meeting, and that we uphold
that particular memo generated by Greg Boysen and direct the Village
President to pursue the Venture option at this particular juncture
in time, not closing the door on D.M.A.P. , but we would explore
additional possibilities through them not only for a source of water
but possibly as a vehicle as a water commission for the issuance of
bonds
Mr. Balling clarified that Trustee Marienthal meant that the D.M.A.P.
concept remain open. President Clayton stated that she understood it
to encompass Mr. Boysen's memo of April 25, 1980.
Upon roll call , Trustees voted as follows:
AYES : 5 - Marienthal , O 'Reilly, Hartstein, Kavitt , Gerschefske
NAYES: 0 - None
ABSENT: 1 - Stone
Motion declared carried.
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Moved by Kavitt , seconded by O'Reilly, to adjourn the ADJOURNMENT
meeting. Upon voice vote, the motion was unanimously
declared carried. The meeting was adjourned at 8:45 P.M.
JanetM. Sirabian, Village Clerk
APPROVED BY ME THIS aaa, DAY
OF Lvvuz , 19 80,
Village President