performance under the contract, by litigation if necessary. He felt the contract was legally binding, and the company had committed itself to its enactment. The following week, on May 14, The Investment Group appeared before the City Commission again, seeking approval for the sale of revenue bonds to be consummated August 20. Director of Finance Ralph Wulz warned the commission of the need to set a closing date so that financing could be arranged on the $6.5 million in temporary water notes which would mature on June 14. Once again, no action was taken, with the majority refraining from a decision, which forced the temporary notes to be extended without being converted to revenue bonds. At the May 21 meeting, officials of the American Water Works Company, Inc., were present to discuss the proposed city purchase of the company. The proposed management contract between the city and the Water Company came up for discussion, since the new Kansas law had voided the old contract unless validated by the new commission. In what had become a predictable grouping, the commission voted 3 to 2 against the contract, with Howse and Gardner in the minority. The vote meant that once the city took over the plant, it would have to handle all of the management and supervision, rather than relying on the company's management to continue to run the system. Proponents of the contract claimed that company management, at least over an interim period as the city adapted to owning the system, could save the city a considerable amount of money. Prior to the vote, Howse had argued that the motion to abandon the contract "was contrary to all the advice of local commercial and investment bankers, City Manager Frank H. Backstrom, Water Supply Superintendent Robert R. Hess, and the best water engineers in the country." (Beacon, 5/22/57). He also claimed that cost to the consumer would be higher, and interest rates on the revenue bonds would be penalized. Despite the effort of Howse and Barr, the vote for the city to run the system passed. John Madden,Commissioner1957-1961. In another step, however, the commission voted unanimously for the city manager "to proceed to consummate purchase of the Water Company, and get what aid he can from American Water Works, Inc.," in selling the revenue bonds. (Beacon, 5/22/57). That vote came in spite of Stevens's previously announced question of the sale, and Madden's, who said he cast his vote reluctantly because he knew the contract was valid even though he didn't think it was right. On May 31, 1957, the 66-inch pipeline to the Equus Beds was used for the first time after a break in the 48-inch fine. Although it had been completed in the fall of the previous year, it had not been used because of legal problems. And, on May 28, the work for which the city had voted in 1952 was finally in service. The action required of the federal government in order to construct the Cheney Reservoir was taken shortly thereafter. On June 5, 1957, Kansas Senator Frank Carlson introduced S 2209 which asked for Congressional authority for the Cheney project. As it happened, the legislation eventually expired without passage at the end of the Second Congressional session of the 85th Congress in 1958, and didn't pass until later. The following day, Congressman Rees submitted similar legislation in the House (HR 7969), which also expired. After the long delay on the revenue bonds, action finally began again when an all-day conference was held on June 20 among city officials, financial advisors, and bond counsel to draft an ordinance to issue the necessary $42 million in revenue bonds. The ordinance was presented to the commission on July 16, but was deferred for one week. Finally, on July 23, it was considered fully, passed unanimously, and placed on first reading. The ordinance authorized the issuance of $41,825,000 in water works revenue bonds, $32,054,700 for the purchase of the Water Company, $9,770,300 for the retirement of the temporary notes outstanding from general obligation bonds approved in the 1952 vote, $1,700,000 for extension of the supply systems, and $154,700 for legal and miscellaneous expenses. It was the first venture of the city into the field of revenue bonds retired from revenues of the involved project rather than from property taxes. At the same meeting, the commission finally unanimously approved the plans and specifications for 20 new wells in the Equus Beds area, to be built on sites bought in 1953 adjacent to the old 35 wells, and formally passed Ordinance 20-957 on July 30. At the same time, new questions arose over the Cheney project from Commissioners Stevens and Madden. Both "lashed out" at the proposed pipeline, with Stevens saying he didn't believe the Cheney vote would have passed "if the Ninnescah program had been on the ballot other than with the proposal to purchase the Wichita Water Company." (Eagle, 7/30/57). Both Backstrom and Gardner claimed that the Kansas delegation was waiting for the commission's approval before pursuing federal action, making reaffirmation necessary. But Madden wanted the new commission to review the matter further and Stevens asked to wait until Madden returned from a consulting trip to Washington, D.C. Consequently, the matter was delayed again. The papers clearly objected to the stance of the new commissioners. The Eagle, while urging the project to be approved, claimed on July 31, 1957, "This is not a matter of past commissions, personal grudges, or off-the-cuff judgments about what Wichita needs. It is a matter of implementing a popular verdict. It is the clear duty of the commission to do so." Finally on August 6, the commission unanimously passed an official resolution reaffirming its support for the Cheney project. Howse and Madden were authorized, on a split vote, to represent the city at the end of August in Washington by lobbying for the legislation. A resolution was passed on August 13 providing for condemnation proceedings for pipeline rights-of-way for the new wells. The necessary ordinances were passed approving the condemnation in Harvey County on September 10. During August, city officials worked to complete the prospectus describing the city's bond sale. At the end of the month Wulz and Hess went to New York to obtain a credit rating from Standard and Poor's, which rated the city based on its ability to pay off the bonds. The higher the rating, the better the risk, which subsequently lowers interest rates a city has to pay. In addition, some 2,300 copies of the prospectus, notice of bond sale, and bid sheets were sent out "for the largest bond issue in the city's history." (Beacon, 8/27/57). When Wulz returned, he reported that the city's bonds had received an "A" rating, the same as for its general obligation bonds, which could only be exceeded by a rating of A-1 or A-1+. Moody's Investment Service also gave an "A" rating and Dun and Bradstreet issued a favorable report. With the rating and the prospectus completed and sent out, the bids were ready to be received, scheduled, and opened on September 17th. At the City Commission meeting on September 10, a question of local investment banking firms bidding as members of a national syndicate emerged, since these firms were also members of The Investment Group, the financial consultants under contract to the city. Fizzell, city bond counsel, and City Attorney Aley both ruled that there was no legal bar to their participation, and Fizzell in a written opinion called it "highly desirable." (Beacon, 9/11/57). In addition, both Gardner and Howse argued that the increased competition would lower the interest rates, and stated their preference for local firms. In spite of this, Madden and Stevens objected to local investor participation because of a possibility of making a "double profit on the transaction." (Beacon, 9/11/ 57). By a 3 to 2 vote, the commission finally approved local participants, with another motion requesting them to credit their consultant fee to bond profits if they were low bidders. The bids were opened on September 17. Members of The Investment Group officially withdrew from the bidding because of the resolution requiring their fee to be credited to their profit, one which was already very low, they reported. Without local participation, competitive syndicates had not formed and only one bid at 4.4949 percent interest rate was received for the bonds. The only bidder was a large syndicate of several huge investment firms, with the First Boston Corporation acting as the account manager, which had been formed after the merger of two groups of firms representing some 180 large investment houses. After receiving the bid, a recess allowed the city staff to analyze it, with Wulz talking to The Investment Group and local bank officials. After the adjournment of the private session, Backstrom informed the commission that the staff unanimously approved the bid. Following remarks by Wulz, Backstrom, and Ranson, of The Investment Group, as well as discussion and questions from the commission, Baird called for a roll call vote. It passed by a 3 to 0 vote, with Stevens and Madden passing because of a question about the high interest rate, the highest in recent history of the city according to Wulz, who also said it was the best offer possible under the circumstances.
performance under the contract, by litigation if necessary. He felt the contract was legally binding, and the company had committed itself to its enactment.
The following week, on May 14, The Investment Group appeared before the City Commission again, seeking approval for the sale of revenue bonds to be consummated August 20. Director of Finance Ralph Wulz warned the commission of the need to set a closing date so that financing could be arranged on the $6.5 million in temporary water notes which would mature on June 14. Once again, no action was taken, with the majority refraining from a decision, which forced the temporary notes to be extended without being converted to revenue bonds.
At the May 21 meeting, officials of the American Water Works Company, Inc., were present to discuss the proposed city purchase of the company. The proposed management contract between the city and the Water Company came up for discussion, since the new Kansas law had voided the old contract unless validated by the new commission. In what had become a predictable grouping, the commission voted 3 to 2 against the contract, with Howse and Gardner in the minority. The vote meant that once the city took over the plant, it would have to handle all of the management and supervision, rather than relying on the company's management to continue to run the system. Proponents of the contract claimed that company management, at least over an interim period as the city adapted to owning the system, could save the city a considerable amount of money. Prior to the vote, Howse had argued that the motion to abandon the contract "was contrary to all the advice of local commercial and investment bankers, City Manager Frank H. Backstrom, Water Supply Superintendent Robert R. Hess, and the best water engineers in the country." (Beacon, 5/22/57). He also claimed that cost to the consumer would be higher, and interest rates on the revenue bonds would be penalized. Despite the effort of Howse and Barr, the vote for the city to run the system passed.
John Madden,Commissioner1957-1961.
In another step, however, the commission voted unanimously for the city manager "to proceed to consummate purchase of the Water Company, and get what aid he can from American Water Works, Inc.," in selling the revenue bonds. (Beacon, 5/22/57). That vote came in spite of Stevens's previously announced question of the sale, and Madden's, who said he cast his vote reluctantly because he knew the contract was valid even though he didn't think it was right.
On May 31, 1957, the 66-inch pipeline to the Equus Beds was used for the first time after a break in the 48-inch fine. Although it had been completed in the fall of the previous year, it had not been used because of legal problems. And, on May 28, the work for which the city had voted in 1952 was finally in service.
The action required of the federal government in order to construct the Cheney Reservoir was taken shortly thereafter. On June 5, 1957, Kansas Senator Frank Carlson introduced S 2209 which asked for Congressional authority for the Cheney project. As it happened, the legislation eventually expired without passage at the end of the Second Congressional session of the 85th Congress in 1958, and didn't pass until later. The following day, Congressman Rees submitted similar legislation in the House (HR 7969), which also expired.
After the long delay on the revenue bonds, action finally began again when an all-day conference was held on June 20 among city officials, financial advisors, and bond counsel to draft an ordinance to issue the necessary $42 million in revenue bonds. The ordinance was presented to the commission on July 16, but was deferred for one week. Finally, on July 23, it was considered fully, passed unanimously, and placed on first reading. The ordinance authorized the issuance of $41,825,000 in water works revenue bonds, $32,054,700 for the purchase of the Water Company, $9,770,300 for the retirement of the temporary notes outstanding from general obligation bonds approved in the 1952 vote, $1,700,000 for extension of the supply systems, and $154,700 for legal and miscellaneous expenses. It was the first venture of the city into the field of revenue bonds retired from revenues of the involved project rather than from property taxes. At the same meeting, the commission finally unanimously approved the plans and specifications for 20 new wells in the Equus Beds area, to be built on sites bought in 1953 adjacent to the old 35 wells, and formally passed Ordinance 20-957 on July 30.
At the same time, new questions arose over the Cheney project from Commissioners Stevens and Madden. Both "lashed out" at the proposed pipeline, with Stevens saying he didn't believe the Cheney vote would have passed "if the Ninnescah program had been on the ballot other than with the proposal to purchase the Wichita Water Company." (Eagle, 7/30/57).
Both Backstrom and Gardner claimed that the Kansas delegation was waiting for the commission's approval before pursuing federal action, making reaffirmation necessary. But Madden wanted the new commission to review the matter further and Stevens asked to wait until Madden returned from a consulting trip to Washington, D.C. Consequently, the matter was delayed again.
The papers clearly objected to the stance of the new commissioners. The Eagle, while urging the project to be approved, claimed on July 31, 1957, "This is not a matter of past commissions, personal grudges, or off-the-cuff judgments about what Wichita needs. It is a matter of implementing a popular verdict. It is the clear duty of the commission to do so." Finally on August 6, the commission unanimously passed an official resolution reaffirming its support for the Cheney project.
Howse and Madden were authorized, on a split vote, to represent the city at the end of August in Washington by lobbying for the legislation.
A resolution was passed on August 13 providing for condemnation proceedings for pipeline rights-of-way for the new wells. The necessary ordinances were passed approving the condemnation in Harvey County on September 10.
During August, city officials worked to complete the prospectus describing the city's bond sale. At the end of the month Wulz and Hess went to New York to obtain a credit rating from Standard and Poor's, which rated the city based on its ability to pay off the bonds. The higher the rating, the better the risk, which subsequently lowers interest rates a city has to pay. In addition, some 2,300 copies of the prospectus, notice of bond sale, and bid sheets were sent out "for the largest bond issue in the city's history." (Beacon, 8/27/57).
When Wulz returned, he reported that the city's bonds had received an "A" rating, the same as for its general obligation bonds, which could only be exceeded by a rating of A-1 or A-1+. Moody's Investment Service also gave an "A" rating and Dun and Bradstreet issued a favorable report. With the rating and the prospectus completed and sent out, the bids were ready to be received, scheduled, and opened on September 17th. At the City Commission meeting on September 10, a question of local investment banking firms bidding as members of a national syndicate emerged, since these firms were also members of The Investment Group, the financial consultants under contract to the city. Fizzell, city bond counsel, and City Attorney Aley both ruled that there was no legal bar to their participation, and Fizzell in a written opinion called it "highly desirable." (Beacon, 9/11/57).
In addition, both Gardner and Howse argued that the increased competition would lower the interest rates, and stated their preference for local firms. In spite of this, Madden and Stevens objected to local investor participation because of a possibility of making a "double profit on the transaction." (Beacon, 9/11/ 57). By a 3 to 2 vote, the commission finally approved local participants, with another motion requesting them to credit their consultant fee to bond profits if they were low bidders.
The bids were opened on September 17. Members of The Investment Group officially withdrew from the bidding because of the resolution requiring their fee to be credited to their profit, one which was already very low, they reported.
Without local participation, competitive syndicates had not formed and only one bid at 4.4949 percent interest rate was received for the bonds. The only bidder was a large syndicate of several huge investment firms, with the First Boston Corporation acting as the account manager, which had been formed after the merger of two groups of firms representing some 180 large investment houses.
After receiving the bid, a recess allowed the city staff to analyze it, with Wulz talking to The Investment Group and local bank officials. After the adjournment of the private session, Backstrom informed the commission that the staff unanimously approved the bid. Following remarks by Wulz, Backstrom, and Ranson, of The Investment Group, as well as discussion and questions from the commission, Baird called for a roll call vote. It passed by a 3 to 0 vote, with Stevens and Madden passing because of a question about the high interest rate, the highest in recent history of the city according to Wulz, who also said it was the best offer possible under the circumstances.
Water Utilities City Hall, 8th Floor455 N. MainWichita, KS 67202