PARK FOREST ACQUIRES WATER SYSTEM

The year 1957 saw some rather wide swings and rapid changes in the municipal bond market. In spite of the changes, the national total of municipal bonds was a near record. A number of municipalities continued the trend toward municipal acquisition and operation of water systems. In Illinois, the outstanding example of this was the acquisition by the Village of Park Forest of the privately owned system. This acquisition is unique in several ways. In the first place, the community is less than ten years old and now has a population of nearly 30,000, with about 7,500 water connections. The builders and developers of the community necessarily had to provide for installation of complete utility services. There was a large, strong private utility ready to install the electric and gas service, but none was available for water service. The developers included in their financing necessary money to provide and distribute a supply of water.

The water itself, coming from deep wells, was so hard that it required the installation of a softening plant. Rates were held as low as possible during the developing stages, but when the community had become stable and the value of the plant, to a great extent financed from earnings, had increased, the owners requested and finally received from the Illinois Commerce Commission a substantial increase in rates. The immediate and natural result was public opposition to the increase and when that had no effect, negotiations to purchase the plant were opened. At that time the bond market was on the down trend. The Village Board, however, persisted and entered into a purchase contract which was contingent upon successful sale of revenue bonds. Such a contract in a falling market required hard and careful work to enable consummation.

This, however, was done and furthermore, in such fashion that the rates are being reduced as of the date of acquisition. Net revenues will still provide funds adequate to pay all debt service on the revenue bonds and leave adequate amounts for future renewals and extensions, and also provide complete debt service on the $950,000 general obligation bonds voted by the electors for the purpose of paying a part of the cost of acquisition and a part of the cost of certain improvements to the system. It is expected that after the above payments have been made there will also be substantial surplus from year to year that may be used for general corporate purposes. The contract cost of acquisition is $3,500,000 which is the exact amount of the revenue bond issue. The system will be completely metered and except on a few peak days during very dry summer months, will serve completely treated and softened water.

Both the general obligation bonds mentioned above, and the question of acquiring the system carried by a vote of 25 to 1. This exhibition of confidence by the electors and their willingness to use general credit for a part of the cost combined with an able presentation by the Village to investors and underwriters to produce interest costs which even in the then rapidly improving bond market, are believed to have shown a much wider and more favorable investor interest than comparable issues. This is evidenced by the fact that a number of the largest national underwriters who would not ordinarily have been interested in the revenue bond issue of a local and newly organized community, combined in one or another of the four biddings groups, with the competition so close that the first two bids resulted in net interest costs of 4.35561% and 4.355849% respectively, which, converted into dollars over the life of the bonds out to 1997, showed a difference of only $231.00. This is probably the most remarkably close bidding for this type of long term revenue bond which has ever been witnessed. Needless to say, the Village officials are now reaping the congratulations of their own people and other communities for the successful results of their persevering hard work. The Village has operated under the village-manager system since 1950. John L. Scott has been the Village Manager since 1952. This is quite a remarkable story for a community so young, and they would no doubt be very happy to explain how it was done to any other interested communities.

Robert A. Dinerstein is village president and members of the board are B. G. Gunningham, Lynn G. Brenne, Robert T. James, Leo E. Orsi, George S. John and James L. Garretson. Paul D. Speer of Chicago was the bond consultant.

Page 14 / Illinois Municipal Review / January