AWA hopes to stay involved

The Altoona Water Authority on Thursday made it clear it wants to stay in the game, if possible, as the city works with a consultant to lease the water and sewer systems long-term for a big upfront payment to stay solvent without the help of Act 47.

After a presentation by a delegation of city officials and a couple testy exchanges, authority member Tom Martin – who as city mayor proposed selling the water systems 10 years ago – suggested the authority try to raise money for an upfront payment and commit to providing ongoing revenue to the city. Then the authority wouldn’t need to be dissolved, the systems repossessed or authority workers face the uncertainty of ownership change and possible decades of privatization.

As a result of Martin’s suggestion, the board instructed staff to investigate how it could satisfy the city, while remaining in control legally, a task the staff already had begun on its own since City Council announced its intentions last week.

It could be a challenge because the Act 73 revision of the Municipalities Authorities Act states that “money of the authority may not be used for any grant, loan or other expenditure for any purpose other than a service or project directly related to the mission or purpose of the authority.”

“It’s fairly clear in the act you can’t do it,” said Pennsylvania Municipal Authorities Association Deputy Director John Brosious on Thursday. “It doesn’t give you a lot of leeway.”

The authority will need to explore the legalities, said solicitor Alan Krier and others.

One potential justification for providing money to the city could be as after-the-fact compensation for the water and sewer systems, which the city turned over for a token payment in the 1980s, said authority consulting engineer Mark Glenn of Gwin, Dobson & Foreman.

The parties used that rationale in 2004 to partially justify a $2.1 million annual increase in the authority’s payment for city “services” – an increase that ended the threat of selling the systems, as then-Mayor Martin had suggested.

Asked whether that rationale could be a winning argument, Brosious asked rhetorically, “Are you comfortable defending the transaction?”

Sometimes, municipalities turn over water systems to authorities for no payment when the systems are in bad shape and need lots of upgrades, Brosious said.

Other times, the parties get the systems appraised, and the authority goes into debt to pay full value, he said.

The Municipalities Authorities Act gives ratepayers the standing to challenge charges they don’t believe are legal in the courts, Brosious pointed out.

If the ratepayer income from residents of the many municipalities other than Altoona goes toward keeping the city solvent, it might generate objections.

The 2004 increase in payments helped the city postpone its entry into the state’s Act 47 distress program for several years.

The Act 73 revisions were placed in the Pennsylvania Municipality Authorities Act in response to Harrisburg’s raiding of municipal authorities to help finance city projects unrelated to the authorities’ functions, officials said.

Another option might be for the authority to become one of the bidders for the systems, an option that the city’s consultant, Griffin Financial Group, mentioned in its presentation to City Council last week.

That presumably could take the transaction out of the prohibited area of Act 73, but it might require the authority to raise enough money to pay off its own $115 million debt through its upfront payment to the city.

Raising the necessary amount of upfront money to make a successful bid – say through a bond issue – might force the authority to raise rates, which in turn could make it difficult for the authority to meet the city’s likely criteria for rate cap during the first several years, followed by rate controls, as outlined in the consultant’s presentation.

And if the city tailors the bid documents to meet the needs of the authority, other potential bidders might object.

Martin’s suggestion didn’t include paying off the authority’s debt.

Still, Martin may have hit upon “an excellent idea,” city solicitor Larry Clapper said at the meeting.

Ideally, the authority could become a partner in the process, city Controller A.C. Stickel told the authority.