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Allentown administration sending potential bidders new request for proposals on water, sewer lease

By Randy Kraft, WFMZ.com Reporter, RKraft@wfmz.com
Published On: Jan 17 2013 06:12:09 PM CST
Allentown council meeting

Randy Kraft/69 News

ALLENTOWN, Pa. -

Allentown will be sending a second request for proposals to bidders interested in leasing the city’s water and sewer systems for the next 50 years.

On Oct. 31, City Council voted 6-1 to support the administration’s plan to send those requests – called RFPs – to seven companies interested in leasing the systems.

At Wednesday night’s council meeting, it became known that a second RFP will be sent to six potential bidders in the next two or three weeks.

“It is a work in progress,” said Julio Guridy, president of City Council.

Allentown Mayor Ed Pawlowski hopes the process will result in a lease for $130 million to $230 million and prevent the city from going over its own fiscal cliff, in the face of rapidly rising multi-million-dollar pension payments for retired police and fire personnel.

The mayor originally hoped to get proposals from seven qualified bidders by the beginning of December and to select one before the end of 2012. He wanted to have a signed contract no later than March.

On Oct. 17, the mayor called a news conference to assure residents and businesses that his lease plan will protect them from skyrocketing water rates for the next 50 years.

He promised water rates will remain unchanged through 2015. From 2016 to 2032, they would rise 2.5 percent plus the Consumer Price Index. Beginning in 2032, they would rise 1.5 percent plus the CPI.

Pawlowski has said the proposed lease agreement ensures Allentown will have even better quality water, with standards that meet or exceed the city’s current requirements. He said he doesn’t want to put his own children, or the children of any other families living in the city, in jeopardy.

The mayor promised City Council that the lease negotiation process will stop “if the proposals that come back do not meet the expectations we hope to get.”

What Pawlowski presented to the public was “a work of fiction, a fairy tale,” charged City Council member Jeanette Eichenwald, who opposes a lease.

She said when negotiations began after the first RFPwent out, potential bidders said: “Wait a minute. How are we going to make any money on this?”

She said among the many issues in dispute with potential bidders are the 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.

“No one is going to give us $200 million unless they can make money,” said Eichenwald. “They have to borrow that money. This has to be worth it to them. Something has to give.”

“A number of conditions in the original RFP were not acceptable to the bidders, including the basis upon which the permissible rate increases are calculated,” maintained Dan Poresky, a city resident who opposes a lease and raised the issue of a possible delay in the negotiation process at council’s meeting. “It means some of the things the mayor said about safeguarding water quality and keeping rates in line are not going to be as favorable to ratepayers as the mayor originally presented them.”

Allentown communications coordinator Mike Moore asked that questions about the status of the lease negotiations and RFPs be submitted to him via e-mail. But rather than answering 15 initial questions submitted by WFMZ, on late Thursday afternoon Moore issued a statement:

“The city and six pre-qualified bidders interested in the concession lease agreement for the City of Allentown water and sewer plants are continuing to do their due diligence.

“The remaining bidders are Aqua Pennsylvania, American Water, Lehigh County Authority, NDC Housing, United Water and Allentown Forward.  Allentown Forward was advised in September that it was not qualified because it lacked an operator but could be included if it secured an operator that was satisfactory to Allentown.  It has since secured a satisfactory operator. Access Capital and Macquarie chose to drop out.

“The city will be issuing a Request for Bid (RFB) to receive bids for the 50-year lease of the water and sewer systems.  It will be published on the city web site.  Those bids will be evaluated and City Council will take a final vote on approval."   

Lehigh County Authority spokesman Liesel Adam said she could not shed any light on the reasons why another RFP is going out because of confidentiality agreements that are in place with the city.

At Wednesday night’s City Council meeting, council members indicated all of them are having input into the revised RFP. But no one at the meeting could say how long another RFP might delay the approval process – which was one of the unanswered questions WFMZ put to Moore.

Council member Peter Schweyer said City Council will not have to vote to authorize the administration to send out a second RFP.

Guridy said his understanding is that once the revised RFP is sent, it will be posted on the city’s Web site so the public has a chance to see it.

Resident Julie Thomases asked: “They’ll have a chance to see it, but will there be any way to comment on this?”

Said Guridy: “I don’t think we discuss the RFPs in public. We do discuss the agreements.”

Guridy said the public will have a chance to comment on the concession agreement before council votes on it.

In fact, Schweyer said six weeks will pass for the public to comment before council acts on approving any lease agreement.

Before council approves a contract, it intends to have the Pennsylvania Economy League investigate how the proposed lease agreement compares with having a newly created public water and sewer authority take over the water and sewer systems.

Eichenwald does not know what sending out another RFP will do to the administration’s timetable, but said Pawlowski wants to make sure the deal is completed “before citizens have a right to vote on it.”

On May 21, primary election day, Allentown voters will decide if City Council should adopt an ordinance that states a referendum should be held so future voters can decide if any city-owned assets worth more than $10 million should be sold, leased or transferred. Even if voters approve that ordinance in May, a lease of the sewer and water systems probably will be completed long before a referendum on that lease could be held in November.

As residents again raised questions about the proposed lease during council’s meeting, Gary Strathearn, the city’s finance director, expressed angry frustration about the issue of solving the city’s pension crisis.

“This is a very frustrating and painful thing,” said Strathearn. “I have to look at it every single day I come to work. I don’t want anyone to misunderstand how much time and effort we’ve put into researching how to do this the right way for the city and to protect the city.”

“We did do a lot of research on this,” he said. “We didn’t just rush into the water (lease). We looked at every aspect. We’ve done our homework on every possible thing. I’ve spent a lot of time trying to figure out a way to beat this thing.”