South Elgin may buy water/sewer district
By Janelle Walker For The Courier-News June 20, 2012 2:56PM
Updated: July 23, 2012 7:22AM
SOUTH ELGIN — Following the proposed purchase of $29 million in bonds later this summer, the village plans to purchase the assets — and the debt — of the Otter Creek Water Reclamation District.
The South Elgin Village Board this week approved moving forward with the bond sale and acquisition of OCWRD.
“When Otter Creek was created ... it was anticipated that one day, once the debt was paid off, the village would take control and Otter Creek would dissolve,” said Derke Price, South Elgin’s village attorney.
Otter Creek was created to serve what is commonly known as the Thornwood commercial and residential development, west of Randall Road and north of Silver Glen Road, he explained. At the time, South Elgin’s sewer and water systems did not reach across Randall Road, and the new water district was the most efficient way to serve those proposed homes, Price said.
Now, the water reclamation district covers 770-plus acres and has 1,468 residential and 215 commercial customers.
It also owns wells, water softening equipment, water and sewer pipes, and a water tower, Price said. It does not treat sewage — that is piped to and treated by the Fox River Water Reclamation District in Elgin. It also connects to South Elgin’s water distribution system in case an emergency affects its own supply, Price said. But it delivers water and pipes away sewage from its customers separately from FRWRD or the village.
In 1998, Otter Creek, the village and FRWRD entered an agreement “concerning the construction of the water and sewer systems, and the operation and management of those systems,” Price said.
At that time, Otter Creek initially issued $19 million in bonds for the water and sewer improvements.
In 2006, “Otter Creek issued $23.4 million in bonds to refinance the 1999 issuance at lower rates, and added a general-obligation pledge,” Price said.
Growing too slowly
Initially, the plan was for Otter Creek to pay off its debt by capturing user-connection fees as new homes and businesses were built. However, although South Elgin added more residents to the water district’s coverage area, several developments anticipated for the district either never happened or were annexed by surrounding communities, not South Elgin.
“From its inception, the parties have intended that the village acquire Otter Creek when Otter Creek’s debt was satisfied,” Price said. A second, 2005 intergovernmental agreement “provides a mechanism and procedures for the village to pay off the bonds of Otter Creek when and if the village chooses to do so,” he added
As South Elgin already handles the billing and other administrative functions for OCWRD, and interest rates are at a historic low, now is the time to purchase the system, Price said.
“The village can pay off the debt and remove a level of government and administrative cost. The village has looked at (the purchase) before, but it has never made business sense until now,” Price said.
“With historically low interest rates and a superior credit rating for the village ... it makes sense in long and short term for the village,” Price said.
Otter Creek has a three-member board, appointed by the Kane County Board chairman.
“They have legal and financial advisers and other vendors, but no employees,” Price said. Those consultant/advisers cost the water district about $300,000 a year, he added.
South Elgin officials believe that with a lower administrative cost, the village can pay off the new bonds through user fees, Price said.
Still, as a taxing entity, voters would need to approve a referendum to dissolve OCWRD, Price said. That could happen at the November general election, but the existing bonds must be paid off and all properties transferred to the village first.