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No water lease financing information yet from Lehigh County Authority

By Randy Kraft, WFMZ.com Reporter, RKraft@wfmz.com
Published On: Apr 11 2013 06:11:08 AM CDT
Lehigh County Commissioners

Lehigh County Commissioners

ALLENTOWN, Pa. -

Lehigh County Authority is not willing to tell Lehigh County commissioners how it will finance the $220 million it must pay Allentown to lease the city’s water and sewer systems for up to 50 years.

“It is inappropriate that they are not willing to present this information and hiding behind a ‘confidentiality agreement’ they signed with the city,” Commissioner Vic Mazziotti told his colleagues during their Wednesday night meeting. “It’s two public bodies making a decision that’s of monumental importance if it adds $400 million of debt service without one dollar of improvement to the system.

“Even though it may be the right thing to do, the public has a right to review it, understand it, ask questions about it. We should find a way to cause that to happen before this agreement is finalized. We need to do what we can to cause that to happen,” Mazziotti added.

No other commissioners suggested a way to force such a meeting with LCA before the lease is signed, which may happen later this month, although Commissioner Michael Schware said he agreed with everything Mazziotti said.

Said Schware: “I find it stunning that in two weeks possibly the biggest thing to impact the city for the next 50 years is going to go through without any real public input or public knowledge about what’s actually being approved.”

Allentown’s City Council plans to vote on approving the LCA’s highest bid on April 24, the same night as the next county commissioners meeting.

Lisa Scheller, chairwoman of the nine commissioners, said if City Council accepts the bid, the lease contract will be signed within 48 hours.

Mazziotti indicated that on Tuesday he asked Aurel Arndt, LCA’s general manager, if he would be willing to appear before the commissioners and explain how LCA calculated that winning bid. Specifically, he asked if Arndt would be willing to share the information LCA reviewed to make that decision.

“He said he was not willing to do that,” said Mazziotti. “And the reason he was not willing to do it is because there is a confidentiality agreement they have with the City of Allentown.”

He said Arndt told him he would be willing to meet with commissioners at a later date. Said Mazziotti: “That later date is probably after the contract has been signed.” He added then it will be too late for the public.

Arndt followed up his conversation with Mazziotti by sending all the commissioners a letter, dated April 10, stating many people have asked LCA for more information about its bid, including the financial analysis it used to develop that bid.

Arndt wrote that LCA “sincerely” looks forward to publicly sharing all those details, but remains subject to “strict confidentiality requirements of the bid process, with significant legal and financial consequences should we opt to break the confidentiality agreement. We have been advised by our legal counsel that full disclosure poses risks to LCA that we cannot overcome at this time.”

But Arndt also promised: “As soon as we are legally able to do so, we look forward to opening our books for public review” so all stakeholders can review LCA’s bid analysis.

Mazziotti said Arndt may indeed be bound by a confidentiality agreement “but I think it’s inappropriate to have a confidentiality agreement that doesn’t permit the public to understand such a significant transaction. A lot of people have concerns about it and they have the right to express those before this agreement is finalized.”

The commissioner called LCA’s $220 million winning bid “significant,” maintaining that when the interest on bonds needed to finance the lease is included, ratepayers will be required to pay more than $400 million.

He said Arndt has made many statements that LCA is absolutely confident it can cover the debt and that most of the debt cost would be borne by Allentown water and sewer customers.

He noted commissioners previously were told LCA could not provide information about how it will finance its debt because it was competing with five other bidders for the lease and had to protect competitive secrets. But now, he said, “We’re beyond that.”

Mazziotti acknowledged LCA is a separate public body, but said if LCA has so much trouble paying its debt that it negatively impacts its ability to serve customers, the county commissioners “would have a moral and practical responsibility – if not a legal one – to step into that situation.”

On March 13, the county commissioners voted 5-4 to refuse to extend LCA’s existence for 50 years so it could participate in bidding on the 50-year lease. Initial expectations were that vote knocked LCA out of the bidding. But Allentown revised the draft agreement, so LCA still could bid even if its charter expires in 36 years.

Schware said he realizes the matter now is out of the commissioners’ hands, “but it’s important that this information is public.” He noted LCA was touted as a better option for the lease because of its local control and its accessibility. In this case, he said, “that accessibility isn’t there.”

Commissioner Percy Dougherty suggested discussing the issue with LCA in a closed-door executive session, but Mazziotti said it should be discussed publicly.

“The public has a right to know and understand. This is a significant decision.”