The Scranton Times has been routinely drumming up criticism of Mayor Courtright for a lack of clarity regarding the recent sale of Sewer Authority assets to Pennsylvania American Water. Information wants to be free, as they say, and so I agree that more information from the Authority and the Mayor are necessary. While I’ve tended to think that the deal was good for the city before I got the details from the Mayor’s presentation at the recent townhall meeting, I am now inclined to say that it wasn’t a good deal, but rather a great one.
Important factors that help the citizens of Scranton:
- The EPA mandated about $140 million in upgrades to our system. Scranton/Dunmore must split storm and water lines. We no longer have to pay for this. PA American Water will pay.
- We netted $83 million from the sale. While this is less that projected, “projections” are just that. It’s pretty clearly outlined in the public document where this money went. Hint: it’s not sinister. And while there may be a small chorus distrusting the document, we can be certain the Times would’ve destroyed it had it been inaccurate.
- The Mayor negotiated caps to PA American Water’s ability to increase our rates. This saves Scrantonians and Dunmoreans a fortune, because if the Sewer Authority were still in control, we’d be seeing massive hikes to pay for those mandates.
- The biggest and what I thought to be the most obvious benefit: staving off bankruptcy. The city is saddled with debt and pension obligations. The proceeds have been used to reduce debt service and mandatory minimum payments to the tune of millions. If the city reduces its yearly expenditures, but revenue stays the same, what happens to tax rates? Answer: they don’t go up. So this deal saves taxpayers what would’ve been a fortune in tax increases. God knows I’m a little tired of those.
- If the City DID NOT make this deal and went into receivership, guess what would’ve happened? City assets would’ve been sold anyway, in order to achieve solvency, the SSA in particular. And who would’ve negotiated the deal? Not the city, which means we would’ve been in the same place with the SSA as we are now, but with significantly less money and protection from rate increases. On top of that, a receiver would jack up taxes and begin laying people off in droves (this is what’s going to happen to the Scranton School District, but that’s a whole other story). Scranton’s Police Department would definitely see cuts, for example. There’s a reason right now that we aren’t a crime-ridden hellhole like Wilkes-Barre, and it’s the SPD. If they get cut, we would have problems immediately.
- We will exit Act 47 (the state law governing distressed cities). This is a good thing, despite a recent Times editorial trying to argue that it’s not all that great. Honestly, they are trying really, really hard to make this look awful. It’s hard for me not to see this as a political agenda on their part. They frankly have a tendency to support failed, Green Ridge Irish candidates for Mayor. I don’t mean failed to get elected, I mean failed to properly run the City. Or get elected in Mulligan’s case, I suppose.
Now, there are two major, valid concerns with the deal. We are talking about lawyer fees and the stormwater issue. So let’s look at them.
- Lawyer fees, while exorbitant, are actually normally exorbitant. Frankly, this just plain sucks, but it’s reality. I have an insider’s view, because I’m on the Scranton Parking Authority. The hourly rates lawyers charge, which they pro-rate down to the every-ten-minutes range, are exceedingly high. I’m just your average, middle class guy trying to make a living and provide for my family. I’d LOVE to make $250 an hour. But, alas, I’m just a teacher. The Parking Authority deal was insanely complex, involving multiple entities. We paid a lot out in legal fees because there’s a lot of territory to cover. We didn’t come CLOSE to the complexity of the Sewer Deal. I follow the Scranton-Dunmore United page on Facebook, just to see what they are saying. Its founder, Mike Mancini (who spoke at the town hall), is leading the critical charge and said he worked in real estate and knows things could’ve been much cheaper. While I doubt he brokered the sale of a public utility in his career, which requires PUC approval (which was denied initially, causing a lot more legal work to be done in order to comply with their needs), the sale also cost 2.24% of the value of the deal. I’m pretty sure the commission rate for a real estate agent is 6%. That doesn’t even include lawyer fees for real estate transactions. So… it actually came in cheaper. Significantly so.
- Stormwater is, of course an issue. People are right to be worried about this, because we do not know exactly what stormwater maintenance will cost. That said, we do not have to pay for $140 million in stormwater fixes (that separation of systems I mentioned), so already, whatever we will pay to manage it will be cheaper than what it would’ve been had we not sold the Authority assets. I’m having trouble finding it right now, but I believe it was Bethlehem that has a $4.50 per month fee to maintain their systems. We are of comparable size. The city has said that it’ll cost roughly $60 per year to maintain the system, so that’s in line with Bethlehem.
Ultimately, we have, as ratepayers, saved money via this sale. We, as taxpayers, have staved off tax increases. We, as citizens of Scranton, will not see a receiver come in and decimate us.
This isn’t a good deal, it’s a great one.