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Allentown's water/sewer lease debate should end with Thursday vote

By Randy Kraft, WFMZ.com Reporter, RKraft@wfmz.com
Published On: Apr 22 2013 07:00:00 PM CDT
Updated On: Apr 23 2013 04:17:54 AM CDT

More questions, outrage over water sewer lease

ALLENTOWN, Pa. -

After months of numbers-crunching, mind-numbing and impassioned debate, on Thursday night Allentown City Council will vote on leasing the city’s water and sewer systems to Lehigh County Authority for $220 million.

The controversial 50-year-lease was the sole topic of a Monday night City Council committee-of-a-whole meeting that lasted four-and-a-half hours, not counting one 15-minute break.

Several opponents continued to urge council to postpone Thursday’s vote, noting council just got its first look at a Pennsylvania Economy League report on lease alternatives Monday afternoon and the public won’t see it until it’s posted on the city’s website Tuesday.

But just before Monday’s meeting ended, all six council members attending voted to move forward both a resolution and an ordinance approving the lease -- but without making any recommendation – for a final vote at their 7:30 p.m. Thursday meeting.

“You guys have your minds made up and we’re standing here in line waiting to speak for nothing,” charged resident Lou Hershman, the first resident who stood to address council. “Are we wasting our time tonight?”

“I don’t think we’re wasting time,” responded council president Julio Guridy. “I don’t think I have my mind made up.”

Highlights of the meeting were a summary presentation by the economy league in the first half, followed by 16 people standing to ask questions or make statements, and an LCA presentation in the second half, followed by comments from 14 people – many speaking for a second time.

Anticipating lease approval, some city residents recommended LCA’s board should be expanded to include as many as four Allentown residents.

LCA general manager Aurel Arndt said one city resident already serves on its seven-member board of directors and that another board member owns a business and property in the city.

Arndt said all board members are appointed by Lehigh County. Allentown Mayor Ed Pawlowski said the county executive would have to be asked to put more city residents on LCA’s board. Guridy said he personally will advocate getting more city residents on that board. But Guridy was not willing to make that a condition for approving the lease, as proposed by resident Dan Poresky. Nor was anyone else on council.

Assuming City Council approves the concession agreement, Arndt said LCA plans to schedule a number of public meetings “where we will try to share ideas and engage customers, employees and municipal officials regarding the impact and consequences of the lease.”

LCA was accused of polluting Little Lehigh Creek with E. coli bacteria by resident Allen Howells. Allentown gets 25 percent of its drinking water from the creek.

Resident David McGuire urged City Council to review state Department of Environmental Protection and federal Environmental Protection Agency records of LCA.

Arndt said he was troubled by Howells’ assertion and would like to see the basis for it. He said LCA is not perfect, but its goal is “that environmental problems get solved and don’t perpetuate.”

Some residents questioned why city water rates will continue to increase for 50 years if LCA’s loans to lease the system will be paid off in 30 years. Arndt said that money could be used to pay for capital improvements without additional borrowing or LCA could simply not raise rates as much as the lease agreement permits.

Allentown’s leaky system

There also was much debate – again – about what capital improvements costs are and are not included in rates under the lease. And the mayor again explained residents will have to pay for capital improvements over the next 50 years whether Allentown or LCA runs the water and sewer systems.

Arndt said “unaccounted-for water” comprises less than 10 percent of LCA’s total water production. Kan Koplish, retired Allentown water resource manager, said 10 percent is a very good benchmark, lower than the national average of 12-15 percent.

Koplish said Allentown loses 23-24 percent of its water through leakage, because the city has more than 300 miles of pipe, 50 percent of it installed before 1945 -- “so the leakage rate is significantly higher.”

Monday’s meeting, which started around 5:30 pm and ended at 10:15 pm, was a continuation of a committee-of-the-whole meeting that began last Wednesday.

Council met for five-and-a-half hours that night, mostly to discuss the lease. Fewer people attended Monday’s meeting and many left at the break.

Once again, Mayor Pawlowski sat at the front of the room facing council, flanked by his aides and lease consultants.

At the start of the meeting, the mayor announced that all 60 chambers of the Greater Lehigh Valley Chamber of Commerce officially endorsed the city’s lease with LCA and that the Lehigh Valley Partnership, comprised of “every single large employer in the Lehigh Valley,” also supports the plan.

Pennsylvania Economy League executive director Gerald Cross summarized the league’s report by reviewing options available in addition to a lease.

“What was your view of the lease itself?” Pawlowski asked Cross. “In looking at all these options, it is a good option for us to pursue?”

Said Cross: “I think the proof’s in the pudding. When you close on a $220 million cash infusion into a city that needs money in the near future, then it speaks for itself.”

Public comments

Lehigh County Commissioner Vic Mazziotti, who resides in Allentown, called the lease deal “a shell game. Instead of increasing your property tax bill, we’re going to increase your water and sewer bill. You haven’t eliminated that cost. You’ve just shifted it to another bill. And the same people are going to pay for it.”

Mazziotti maintained when all the costs of borrowing $220 million are added up, including interest, it will be “a $400 million solution” to a city pension debt the administration puts at $158 million.

McGuire got the most applause of the night – applause Guridy discouraged – when he urged the city “to set aside the bullying tactic” of saying either approve the lease or face a 45 percent tax increase. He compared that bullying to North Korea’s nuclear threats.

City resident Nat Hyman praised the lease as a miracle, saying: “The mayor and his administration have pulled a rabbit out of a hat.”

But resident David Melman, a lawyer, said: “There is no magic rabbit out of a hat and if it sounds too good to be true, it is. My fear is that my grandkids are going to be in a room just like this one with a $500 million or $600 million problem, asking themselves ‘how did we get into this to solve a $160 million problem?’”

Hyman said he was attending his first city council meeting because of “the grandstanding and level of vitriol I’ve seen from so many people” – including city council candidates hoping to unseat those on the dais by using the lease as a political platform.

Hyman, who turns old city factories into apartments, said he owns more than 500,000 square feet of apartments in Allentown and pays all his tenants’ water and sewer bills. Financially, he has almost as much at stake as anyone in the room, he said. “I’m not happy if water rates would go up, [but] all the other alternatives are far more offensive. You‘re looking at a real estate tax hike, some level of service hike or potentially bankruptcy of the city.”

Hyman encouraged council to vote for the lease, “because it is far and away the least offensive or obtrusive resolution.”

The mayor has proposed an excellent solution, said Rick Daugherty, executive director of Lehigh County Senior Center who also owns apartments in the city. He noted LCA is non-profit, will provide service at a lower cost and has an excellent track record. Daugherty also asked council to support the lease deal.

LCA’s pitch

Asa Hughes, chairman of LCA’s board, said it has the most financially responsible staff of any municipal authority in Pennsylvania. As a non-profit, he said LCA presents “the best service at the lowest price.”

Arndt said LCA has enjoyed an annual customer service satisfaction rating of 95 percent or higher for the last five years.

Arndt said LCA’s board holds public meetings at noon on the first and third Mondays of each month at LCA’s headquarters in Wescosville.

The 46-year-old authority provides water and/or sewer service to 16 local municipalities, serving 22,500 people. Arndt said most of the documents related to the lease are available at lehighcountyauthority.org or allentownwatersewer.com.