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Is Allentown sewer lease plan based on a myth? One opponent says so

By Randy Kraft, WFMZ.com Reporter, RKraft@wfmz.com
Published On: Feb 07 2013 07:51:10 AM CST
Dan Poresky

Dan Poresky addresses Allentown City Council

ALLENTOWN, Pa. -

A leading opponent of plans to lease Allentown’s water and sewer systems challenged “the very foundation” of the city’s rationale for that lease at Wednesday night’s City Council meeting.

Dan Poresky of Allentown reminded council that Mayor Ed Pawlowski repeatedly has said state law prohibits the city from using revenue generated by its water and sewer systems to pay non-water related expenses, including rising pension costs.

Poresky said he got a very different story from Michael Gasbarre, executive director of the Pennsylvania Local Government Commission in Harrisburg.

That commission is a bipartisan state agency that provides research assistance to state legislators, especially on questions pertaining to local government.

According to Poresky, Gasbarre said Allentown should have the ability to use its water revenue as it sees fit. Poresky called that “a real shocker.”

“If it’s true, the rationale for privatizing could be totally undermined,” Poresky told council.

He said Gasbarre told him that, “as a home rule charter city, it is Allentown’s charter, not state laws, that prevails.”

Poresky said he and Gasbarre reviewed the city’s home rule charter and administrative code and found “no provisions that preclude Allentown from transferring water and sewer revenue to other departments.” But he said they did find provisions that permit council to transfer funds. He said Gasbarre “knows of no state regulations that would interfere with doing that.”

Poresky told council the city already is using water revenue for non-water-related expenses: “Of the $30 million the water and sewer department takes in every year, roughly $10 million is used for expenses such as park maintenance, snow removal and many other items.“Why is it we can use water revenue to pay for cutting grass and no one has stopped us?” he asked. “Yet we can’t use that revenue to help with the pension obligation. It makes no sense to me.”

Later Poresky said about 10 percent of the city’s annual general fund expenditures is paid by water revenue. He said Gasbarre told him that’s not been a problem because Allentown is a home rule charter city and “your rules supersede state rules.”

“I’m not taking it as gospel,” said Gary Strathearn, the city’s finance director, in response to the information Poresky provided council. But he added: “We will be more than willing to look into it. I want to go through it all…check out everything Mr. Poresky said.” Strathearn also said he’ll be glad to sit down and talk with Gasbarre.

Poresky asked members of council how carefully they have reviewed the matter and encouraged them to independently explore it. “As you recall, I stood here more than once and asked you to check into the legality of the mayor’s plan to use a private company to do what he says we can’t do on our own.”

Council member Jeanette Eichenwald described the information Poresky presented as “incredible.”

“I am guilty of accepting what the mayor has told us that we could not use the funds generated by the water and sewer,” she said. “I don’t have enough words to commend you and salute you.”

Based on the “powerful” information” presented by Poresky, Eichenwald, who opposes the water lease, said if council was a jury on a TV show, “at this point we would say ‘case dismissed’.”

She asked Poresky if he is sure about the information. “No, I’m not sure,” he replied. “I’m only saying what I got from one person who happens to be very knowledgeable, who is in a position of really knowing his stuff.”

Poresky stressed it is council’s responsibility to confirm the validity of the information he provided.

Resident Rich Fegley said he doesn’t understand why the administration and city council “can’t straight up answer and say ‘Mr. Poresky is wrong this evening. We’ve reviewed this and we’ve looked at the law and it’s not allowable.’

“This obviously has not been researched at all,” said Fegley. “I wonder how the administration and council can just kind of say ‘oh, we trusted the mayor.’ That’s what I’m hearing and I’m shocked by it. Should we trust anything that’s been presented to us at all? Misinformation has come from the mayor. I’m floored.”

Poresky said he started calling Harrisburg to find out why Pawlowski legally “can get away with using a private company” to do what the mayor says the city can’t do.

Gasbarre told him what the mayor is proposing is legal but that it’s also legal for the city to use that water/sewer revenue for other purposes.

Eichenwald asked two top city administrators at the council meeting, Strathearn and managing director Francis Dougherty, how the city justifies using water and sewer revenues for some things but says that money can’t use it to for pension obligations. She got no direct response.

Strathearn’s answer was that even if water and sewer revenues can be used for pension debt, it will only cover the minimum balance. “It still doesn’t address the $200-plus million unfunded liability that we have, which is getting worse as time goes on. We need in excess of $200 million.”

Both Strathearn and Dougherty promised council they will look into the matter.
“I know we’ve had legal opinions on this,” said Strathearn. “This was raised months ago. It’s been under the microscope. We’re willing to do our homework.”

Council president Julio Guridy told Poresky some of the leading experts in the country have talked to council about the proposed water/sewer lease, but also promised council will check out the information he provided. Guridy said he heard from many other people, not just the mayor, that the city cannot use water/sewer revenues to pay the unfunded pension liability.

Council’s leaders asked their solicitor to check whether it’s true that Allentown’s home rule charter supersedes state laws.

Council member Peter Schweyer said he and City Clerk Michael Hanlon already have started looking into the matter.

Also during council’s meeting:

• Eichenwald failed to convince her colleagues to create a committee to study the lease/pension issue that would have consisted of three council members, two residents and two city administrators. Her motion failed 6-1.

• Dougherty announced construction will begin on the new East Side Fire Station, along Irving Street near Dieruff High School, after a contract is awarded May 1.

• Guridy authorized creation of an ad hoc committee to investigate creating A Payment In Lieu Of Taxes (Pilot) program, aimed at getting some revenue for the city from non-profits that own a considerable amount of property in Allentown – such as colleges and hospitals—but pay no real estate taxes. Bethlehem is working to create such a program, said Eichenwald, whom Guridy appointed to chair that committee.

The committee will include three members of city council (Eichenwald, Jeff Glazier and Ray O’Connell) and two members of the administration to investigate how Allentown should proceed on the issue.