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Allentown City Council anticipates April decision on water lease contract

By Randy Kraft, WFMZ.com Reporter, RKraft@wfmz.com
Published On: Feb 18 2013 03:21:26 PM CST
ALLENTOWN, Pa. -

Looks like Allentown’s City Council will make a final decision on a 50-year water/sewer lease about a month before city voters can vote on a proposed ordinance that would require council to have the issue decided in a referendum in November.

Nothing is cast in stone, stressed City Clerk Michael Hanlon, but he expects council will decide the lease issue before the end of April. That was confirmed by Council President Julio Guridy and Vice President Raymond O’Connell.

City Council plans to hold two special meetings solely on the issue – one before the end of this month, the second in late March –before it votes to approve a lease contract.

Lease opponents succeeded in getting a proposed ordinance on the ballot for the next election, but that primary isn’t until May 21. If city residents approve that ordinance, any sale, lease or transfer of city-owned property valued at $10 million or more would have to be approved by voters in a referendum. November is the soonest such a referendum could be held.

Even if approval of the lease would be delayed beyond May 21, and even if city residents vote yes on the $10-million-question ordinance, that would not stop council from approving a lease. Lease opponents had hoped  just getting the issue on the ballot would generate enough public pressure to convince council to delay signing a lease until after the$10-million question is decided, but most on council seem undeterred.

"I don’t want to rush anything,” said Guridy. "But at the same time, I don’t want to waste time trying to convince someone who will never be convinced."

A proposed final concession agreement, apparently a refined version of the original request for proposals sent to companies interested in leasing, will go out Feb. 25 – and be posted on the city’s website.

Six participating companies, including Lehigh County Authority, then will bid on that draft contract. Hanlon said those companies will review that contract and submit bids to the city before the end of March. Allentown finance director Gary Strathearn has told council the administration is very close to finalizing a lease agreement.

In late February, shortly after the proposed agreement is sent and posted on-line, council will conduct a public meeting specifically about operating standards in that contract, including water quality standards that must be met by the company that wins the contract. Hanlon said that special meeting may be on Feb. 27, but that date is tentative.

Dan Koplish, the city’s former manager of water resources, will make a presentation at that special meeting. Koplish has been hired as a consultant by council to ensure water quality standards will be maintained if the water system is leased.

"Koplish will give a report on his findings of all the meetings he has attended," said Guridy.

Council agreed to pay Koplish up to $10,000, but soon will act to increase that because of all the work he has done. "We still haven't settled on how much more Dan Koplish will get paid," said Guridy.

In late March, around the same time the city’s administration is expected to select a bid for the lease, council plans to hold another special meeting, according to Hanlon. It will focus on a Pennsylvania Economy League study of alternatives to the lease, including the possibility of creating a public authority.

In late October, Gerald Cross, executive director of the Economy League, told council it could not measure other alternatives against a lease until after the city receives bids. Cross explained a “side-by-side” comparison of leasing to a private company and creating an authority would give the city a clearer picture of costs and benefits of each.

At City Council’s last meeting on Feb. 6, Guridy seemed to support that position, saying the Economy League is working on alternatives “but we have to wait until we can compare apples to apples and find out what the final bids will be. That’s what they said they wanted to do.”

At the same meeting, council member Peter Schweyer said whatever the Economy League comes up with won’t be a perfect comparison because council  still won’t know the bid number from whatever entity the city picks to lease the city.

Last October, council approved paying up to $15,000 to the Economy League to do an independent review of options regarding the city’s impending $158-million-and-growing pension crisis.

Before formal negotiations with potential bidders began, Mayor Ed Pawlowski said he hoped the 50-year lease will bring the city up to $230 million.

Council must approve the lease contract.  Hanlon noted council could decide to do nothing if it does not think a lease is the best course of action for the city. The mayor has predicted the majority on council will approve the lease contract because “they realize there are no other options.”

Pawlowski has said residents will face a 100 percent tax increase if the lease deal falls apart, in a city that already has the highest property tax rates in the Lehigh Valley.

The original request for proposals was sent to potential bidders shortly after council supported the administration’s plan to send them in a 6-1 vote on Oct. 31.Originally, the mayor hoped to receive bids before the end of December.

“We’ve never done this before,” said Schweyer, who explained no one in the city expected that first request for proposals to result in a final contract. He stressed the Pawlowski administration has kept City Council in the loop every step along the way.

Only one council member, Jeanette Eichenwald, openly opposes the city giving up control of its water and sewer systems for 50 years.

In January, Eichenwald charged that lease negotiations slowed because the city’s initial proposal was “a fairy tale.”  She said the many issues in dispute with potential bidders include rate increases proposed by the mayor, a $4.9 million annual royalty to the city (which is the amount of revenue it now derives from the water and sewer systems) and maintaining high water quality standards, with fines if they are not maintained.

Eichenwald is one of only two of the seven City Council members not facing election this year. The other is Schweyer.

Schweyer repeatedly has stressed in public meetings that he has not made up his mind about the issue. He said he is concerned about four issues: water quality and oversight to maintain that quality, protection for city employees who operate the water and sewer systems, protection for ratepayers and financial certainty for the city. “If the agreement does not make the grade in every one of those categories, I’m not voting for it,” he said. “It’s got to be more than just numbers.”

The remaining bidders are Aqua Pennsylvania, American Water, Lehigh County Authority, NDC Housing, United Water and Allentown Forward. 

The Pawlowski administration and City Council are making public few details about the process, apparently concerned about jeopardizing negotiations. Most questions WFMZ has submitted to the administration have gone unanswered. Most council members also have not responded to them.

“We are still being as transparent as possible with the public on this issue,” said Guridy.

“We want to make sure we provide the best alternative to the city to maintain financial solvency and get rid of this unfunded pension liability. I prefer that we attack the total liability and not just the MMO."  The MMO, or  Minimal Municipal Obligation, is the minimum amount the city is required to pay toward its pension.

“I am cautious that if we raise taxes, we will lose a lot of investors and people in the city will suffer, especially those in a fixed income," Guridy continued.

“We have made great community development strides in the last 10 years and I don't want to set our city back. We are in a path of a renaissance and it would be beneficial for all of us to continue it.

“Now is not the time to go backward.  We need to cautiously move forward and do the best we can for our residents, businesses, our region and our future generation and simultaneously provide the best quality service possible to the users.”