Apr 23, 2013

An Honest Broker

An honest broker should give impartial analysis on a given subject. In the reality of the consulting world, sometimes that information is massaged to justify a wanted conclusion. Last night, Allentown City Council was told by The Pennsylvania Economy League that a new Allentown water authority would cost the ratepayers more than the Lehigh County Authority, which won the bid for the city's system. The League was hired by City Council to assist and justify their upcoming vote. They claim that a new Allentown Authority wouldn't be tax free, because it would be formed to pay for the police pension. They claim that other factors would also cause an Allentown Authority to have higher costs than the LCA. I do know that where there is a will, there is a way. The pension shortfall does not occur until 2015. A non-profit Authority could be currently formed with no connection to the police pension. Only two weeks ago Allentown found a way to accept the LCA bid, even though their charter was not extended for the full term of the lease. Allentonians of memory remember when The Allentown Parking Authority was formed, to assume costs associated with new parking decks. Dan Poresky, a water lease opponent, feels that even if more cost did occur, it would be worth it for the citizens of Allentown to retain ownership of their water system.


Anonymous said...

I'm inclined to agree with you on this Mr. Molovinsky.
Mr. Poresky's insight is not as easy to except. His instincts and legal and political approach have been far less than successful, even if we assume his intentions are honest and good.

ironpigpen said...

"Public Utitilies Improvement Zone".

Just exactly HOW could THAT be any MORE ridiculous than a Neighborhood Improvement Zone?

I really just don't see WHY some bureaucratic agency cannot be created out of thin air, with the power to float bonds to raise money so that Allentown's water works would not have to be sold.

I have legitimate questions.

Just exactly WHO has legitimate answers in this so-called City With No Limits?

Please advise.



Rich Fegley said...

There are no answers to these questions. The Mayor has stated that he has addressed these questions at some point in the past.

The big question is now, "How much would Allentown citizens be willing to pay to maintain FULL CONTROL of our water and sewer systems?"

At Monday's meeting, PEL was asked if they analysed how rates would increase under the LCA lease. Their answer was, "We were not asked to do that." I have to say that City Council does not seem to be interested in fully understanding the impact of the LCA Lease on water and sewer rate payers. PFM and the Mayor are very quick to tell us how rates will be increased dramatically with any non-lease option but we have never been shown how much rate payer will ultimately pay over the 50-year lease.

The Mayor, PFM and now PEL seem to be holding back important information. Even when asked, they make no suggestion that it would be important to have this information. "What will rate payers ultimately pay over the 50-years?"

There have been statements made about an Allentown Authority costing more for everyone because of the bonds being taxable. Yet there is NO ANALYSIS of how water and sewer rates will increase under the 50-year lease with LCA. No numbers have been presented that show how rates will increase over 50-years. There is no percentage increase mentioned anywhere. Yet they are all quick to mention how rates will increase under an Allentown Authority.

I've questioned how Mayor Pawlowski is suddenly able to call the $4.5-million annual royalty payment "icing on the cake" and "not needed". Originally the "free cash flow" for the W&S systems was estimated to be just over $10-million annually. This is the PROFIT that the City makes every year from W&S revenues.

NOTE: At Monday's meeting, LCA stated that the "free cash flow" is over $15-million annually. This $15-million and the 2.0-2.5% rate increase is how the LCA will pay their debt service on $220-million. The "free cash flow" numbers have changed by $5-million annually. Huh?

The September 2012 PFM report stated that the City needed to receive ~$160-million for the "system" plus $50-$65 million to cover half of the lost "free cash flow" and the $4.5-million annual royalty payment would cover the other half of the "free cash flow".

The numbers no longer add up. The deal has changed several times since Sept 2012. $220-million plus $500,000 annually is far from what the Mayor originally told us.

So...we will pay for the pensions "through the tap" instead of through a combination of solutions involving taxes, rates and borrowing. If you don't have to pay a water bill, the LCA 50-year lease is the best deal of course.

The argument seems to be...do you want to pay for the pensions with TAXES or HIGHER RATES? Seems the Mayor's "supporters" don't want to pay increased taxes and they would rather have all of the water users pay for the pensions.

In the end, common citizens using water for drinking, cleaning clothes and toilets will pay for the pensions, not the property owners who pay taxes. Most property owners (landlords) will eventually push any increased costs back on the tenants. Increased taxes or water rates, the tenant will eventually pay for the increase cost to the landlord.