Saturday, January 9, 2010

Myths About The Proposed Sale of Hazleton City Authority Water Department Dispelled

In articles that appeared in local publications this week several myths planted among the public to scare them were dispelled by reporters.

The first myth was launched by an unknown, Chris Paige, in an attempt to discredit an opponent who he will be unable to overcome, Mayor Lou Barletta. He stated that a Pennsylvania law passed by the legislature would derail Barletta's proposed plan to consider the sale of the water department of the HCA. Being an unknown must also mean being naive.

You see, Mr. Paige is an attorney. We must assume he read the law before launching his missle. If he did and also performed a little research he would have known that former Senator Brightbill wrote the law specifically for the City of Lebanon in its attempted takeover of its authority. Putting aside that Todd Eachus publically stated you cannot create a bill for a specific entity because it would be unconstitutional one of the provisions of the Brightbill law was that it pertained to a third class city with a home rule charter. Hazleton is a third class city but it does not have a home rule charter therefore the law does not apply to Hazleton.

The next myth was that the Public Utilties Commission would need to approve Hazleton's sale of the water department prior to any such sale. According to this article by Jill Whalen Jennifer Kocher, a press secretary for the PUC said the PUC wouldn't have to approve the city's decision to sell the water authority, as some have claimed.

As to the "hike in water rates" scare tactic used by opponents of the plan Ms. Kocher also revealed something interesting. She said if the authority is sold to a private company, the PUC will regulate rates and accept comments and complaints from customers about the private company. The authority currently sets rates. Right now consumers of HCA Water Department have no protection from HCA hiking rates by any percentage. With a private entity the PUC would regulate the rates.

The detractors made claims that the other municipalities would have to approve the sale. This article by Jill Whalen dispelled that myth.

Municipalities other than Hazleton served by the Hazleton City Authority likely won't have a vote on whether the water authority is sold.

"In this case, the distinction is that even though the authority serves 13 other municipalities, they don't have a say in it because the city incorporated it," said John Brosious, deputy director of the Pennsylvania Municipal Authorities Association, a group representing more than 2,600 municipal authorities across the commonwealth. "The city never entered into an agreement to make it a multi-municipal authority where every municipal authority represented had a seat on the board.

Brosious said transferring municipal authorities isn't uncommon.

Looking back to Mocarsky at the Times Leader his article he highlights the point that selling authorities have become a popular tool to help financially challenged cities like Hazleton.

The director of an agency that helps financially distressed municipalities regain footing said Mayor Lou Barletta’s proposal to sell the city’s municipal water system is a plan that has gained popularity in the state.

“You will see this much more often as municipalities struggle to finance their operations under the broken system municipalities have to operate under,” said Gerald Cross, executive director of the Pennsylvania Economy League Central Division.

“In a general sense, as long as the money is not being used as a one-time revenue source and it is held (in a trust), then it’s a logical thing,” Cross said.

And that’s what Barletta said he wants to do. He said the Hazleton City Authority’s water system is worth about $60 million and the city can see about $30 million in profits from a sale after debt is paid.

Mocarsky went on to explain how the sale of Coatesville's authority was a boon to its residents. (I remeber traveling on the train that stopped at Coatesville as a college student.)

Pennsylvania American acquired Coatesville’s water and wastewater systems for $48.2 million in 2001. The systems served 8,600 water customers and 6,500 wastewater customers in 16 municipalities.

Funds from the sale, which exceeded $39.5 million after the debt was paid, were placed in a reserve fund. The city was given a $10,000 credit for future water usage and a $10,000 credit for sewage treatment. In addition, rates for water and sewer were frozen for three years and Pennsylvania American was to contribute annually to the city’s economic development fund.

Coatesville Council President Martin Eggleston said Pennsylvania American has “proven very capable of managing the water system,” and the sale has helped the city grow tremendously.

“The city put the sale proceeds in a trust and earns millions of dollars in interest every year. At one point, at its peak, the city of Coatesville earned about $2.6 million in annual interest. If everything is managed properly, this could be of great benefit to the city of Hazleton,” Eggleston said.

Eggleston said interest from the sale revenue “gave an opportunity for (Coatesville) to expand its base and make it more comparable to other third-class cities of its size, provide more amenities to its residents, better police protection and recreation.”

Eggleston said Coatesville officials wanted “to see the city develop and grow, so they just decided to go ahead with the sale.”

As time goes on the myths about poor water quality will also be dispelled by representatives of companies doing a combined $3.5 billion in revenue with researchers, scientists, biologists, microbiologists, and lab facilities in house.

In a previous post the issue of leasing Authority land was uncovered. The point was made about taxation. When the Authority bought the land it was removed from the tax rolls due to the Authority's tax-exempt status hurting the municipalities where the land is located. If the Authority is sold to a private entity the properties will revert back to taxable status resulting in a windfall for some municipalities. However, due to the leases the value of the land may be diminished because the land will not be available for development until the leases expire. The possiblity of development cannot occur before 2028. Taxpayers in those municipalities are suffering due to the actions of the majority of previous board members of the HCA.

People can talk about the tax-exempt status of the Authority as a positive. In reality it is a negative due to lost property taxes to the municipalities.

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