Saturday, January 9, 2010

Are Authority Run Boards The Best Deal For The Taxpayer?

Hazleton Mayor Lou Barletta has announced a plan to sell the Hazleton City Authority's Water Department as a possible solution to the financial crunch being felt by the City of Hazleton. In today's Times Leader an Opinion headline reads "Debt Crisis Needs Creative Solutions". It addresses the financial debt of Luzerne County.

The commissioners have to work through it with a medley of creative programs and innovative thinking – coupled with painful cuts and probably some tax bumps – to harness and bring that liability down.

We’ve seen glimmers of that this week.

The commissioners’ idea to seek proposals for someone or a firm to take over operations at the county-owned Moon Lake Park has the ingredients of making lemonade out a bucket of lemons.

A creative solution is exactly what Barletta proposed in looking at the city's dire finanacial straits. Hazleton is not bankrupt or close to bankruptcy by any means. A term called cash-flow bankruptcy would more accurately describe the situation facing the City and its residents. The fixed costs like insurance, heat, electricity, and obligations like pension liability are leading to an intolerable situation for the taxpayer.

The City could opt to go ACT 47 which would negate all labor agreements among other things to solve the current crisis. The City could raise millage beyond the current increase to an exhorbitant amount that would hurt many homeowners who could not afford the property taxes.

However, Barletta introduced a plan that would include the sale of the assets of the Hazleton City Authority-Water Department to create a long term solution that would not affect taxpayers to the same magnitude relying on property taxes as a means of funding the budget.

The Authority is taking the position that "they are the best run authority in the state". Here is a prime example of what can happen with part time persons running a $68 million asset.

Look at the court case between the Beaver Dams Outdoor Club vs. Hazleton City Authority. If you read the case you will find that past(not present) majority members of the Hazleton City Authority executed a lease with this club for 487 acres of HCA property at a rate of $1 dollar for 25 years.

The Authority further asserts the Board majority’s bad faith was reflected in the terms of the lease: 487 acres at one dollar per year for 25 years.

Now that is what I call one hell of a deal for the taxpayers. First the lease means that no other persons other than those who are members of the Beaver Dams Outdoor Club have use of 487 acres. Secondly since the HCA owns the acreage taxpayers in Carbon County are being cheated out of revenue because the property is being used by private, and can only be used by private people, but it is tax-exempt because the Authority owns it.

Oh but it gets better. The Board executed four other leases in that same year.

Board Vice Chairman did not ask for a copy of the lease at the December 8 meeting because he previously reviewed the lease, which replicated the format of the previous four hunting club leases executed that year.
Id. at 41; R.R. at 246a. With the exception of the property description, the Club’s lease was identical to the other four hunting club leases. Id.

The case does not state how many acres are contained in the four other leases but if they are anywhere close to the amount in the lease at hand there could be almost 2500 acres leased out for 25 years at $1 dollar per year.

This case clearly demonstrates what can happen to public assets when managed by part time board members who received political appointments.
That statement does not mean that every board member would act in a way that would harm the public but again, this case demonstrates the potential. One does not have to research far to look what happened in Luzerne County with all of the arrests of board members for bribes or passing bribes.

The Hazleton City Authority members seem to forget how they got their positions. Mr. Andras threatened to harm the Mayor's plan by seeking legislative relief. He and the entire board must remember that their seats are at the pleasure of City Council. As it stands right now there are three more appointments before the terms of this Council are up. Be careful of the dog who bites the hand that feeds it.

The public outrage over Barletta's plan to sell the water deparment for a potential $60 million or more is interesting since you never heard a word about the "essential taking" of almost 36% of the authority land for $1 per year. The leases will be up in the year 2028.

One may argue that at the end of twenty five years the Authority would still owe the land. But at present calculations of the rise and need for additional property taxes to cover ever rising costs in the City's budget property owners would have forked over at least $6,600.00 per homeowner. Under Barletta's plan there would be no increase. There may be an increase in water rates but they could never equal the rise in property tax.

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