The Altoona Water Authority last week awarded $6.5 million in construction contracts for its Pleasant Valley sewer project, in spite of a recent order from the city not to award contracts or incur debt.
The authority awarded the contracts in keeping with a corrective action plan approved by the Department of Environmental Protection to eliminate wet-weather overflows in the valley.
The city issued the order when it voted to explore the feasibility of leasing the water and sewer systems the authority operates, so additional debt wouldn't distort the value of the systems, as a consultant musters potential bidders.
"I don't see any way we can stop this [sewer project]," said authority Chairman Maury Lawruk.
"I don't fault them for doing that," City Councilman Dave Butterbaugh said on Monday.
Not only has the authority been working on the project - along with a recently completed overflow elimination project in the 58th Street area - for three years, but it has obtained a $2-million grant through the Department of Community and Economic Development and a $6.5-million loan from Pennvest to do it.
In addition, the project is needed to remove a limitation on sewer taps in the area of concern, authority solicitor Alan Krier said.
"I don't think they had a choice," Butterbaugh said.
City Council appoints authority board members, and it can dissolve the authority if it wishes, said authority engineer Mike Sinisi.
"But in between, it cannot intervene," Sinisi said.
Krier said he tended to agree.
Council passed the limiting resolution on the urging of the city's Act 47 coordinator, said city solicitor Larry Clapper.
Case law seems to support such action, Butterbaugh said.
Another municipality passed a similar resolution limiting an authority it had created, and the order survived at least one court challenge, he said.
The authority awarded a $2.7-million contract to HRI Inc. for the pipeline project.
It awarded a $3.3 million contract to Kukurin Contracting for construction of a pump station.
And it awarded a $536,000 contract to HRI for electrical work at the pump station and the authority's combined sewer overflow system.
The contract awards bring the total cost of the Pleasant Valley project to $8.52 million - about the amount of the government funding.
The cost includes $815,000 for engineering and architecture, $347,000 for land, including easements; $593,000 for contingencies and $100,000 in interest during construction.
A November 2011 estimate pegged the cost of the line replacement at about $4.6 million.
Construction on the 58th Street project cost $1.2 million.
That project recently passed a test with heavy rainfall, with no surcharging, said Mark Glenn, the authority's consulting engineer from Gwin, Dobson & Foreman.
At the meeting in which the authority awarded the bids, authority officials scolded Butterbaugh - who wasn't present - for a Facebook post in which he said, "The current authority has no oversight and couldn't care less about the city or its customers."
City officials had come to the meeting to ask the authority for cooperation in the city's efforts to explore the lease options.
"You say something like this, it blows the whole thing apart," Lawruk said.
"It's not the most diplomatic," said city controller A.C. Stickel.
Butterbaugh later explained that he had made the statement in the context of a discussion thread about the authority, its systems, the city's problems and other issues.
Still, he isn't repudiating the statement, he said.
Currently, the authority doesn't answer to anyone or anything, he said.
If the city leases the systems to a private company, there would be oversight by the PUC and the agreement with the city, he said.
Regardless of Butterbaugh's statement, the city and the authority need to become partners, Stickel said.
"We serve the same taxpayers," he said.
Moreover, the authority and its staff are "the experts" on the systems, Clapper said.
Three residents at the meeting warned city officials against leasing the system.
One asked how the city's deal with a buyer could protect the city, authority employees and consumers, given the buyer's presumed expectation of a quick payback on the millions it would pay upfront to lease the systems.
The city's consultant estimated that upfront payment would be between $180 and $240 million.
The consultant has said a 50-year lease could include a temporary cap on rates, followed by limitations on hikes, based on inflation, with additional protection provided by the Public Utility Commission, which would need to approve hikes if the lessee is a private firm.
The agreement could also include a requirement that the lessee keep authority employees for a specified period, honor the union contract and negotiate thereafter with the union in good faith.
The agreement would require the lessee to pay off the city's and the authority's debt and fully fund their pension plans.
Paying off the city's debt would provide an automatic 12-mill reduction in property taxes.
The authority's $12 to $15 million annual income would be the appeal for a bidder, city representatives have said.
"There's money to be made," by a lessee, Stickel said.
If a lessee would agree to the guarantees after making such an upfront payment, however, why isn't the authority already providing those benefits to the community? the resident asked rhetorically.
Another resident - one who didn't give her name, but who said she owns a small business - similarly asked why the authority can't provide the necessary money for the city to remain solvent.
The authority - which the city invited to bid - plans to make a go of it, although it's not clear whether it would need to follow all the same rules as other bidders.
One way or another, city residents would be paying for the deal - either by higher water rates or higher taxes, the first resident predicted.
Higher taxes and higher water bills are not the way to entice more people and businesses to move to the city, said the third resident, Heather Jo Eckels, a member of the Government Study Commission, which is writing a home rule charter.
The first resident said the lease issue should go to a referendum vote.
Officials indicated that the issue is not one that can go to referendum.
But without the lease of the systems, there's little hope for the city to exit its current Act 47 distressed municipality status, Councilman Bruce Kelley told the authority.
And recent revisions to the Act 47 law limits how long municipalities can remain in that protective program, which eliminates tax caps, Stickel said.
Now, if an Act 47 municipality demonstrates that it can't remain solvent, it's dissolved, he said.
Previously, officials have said that home rule and reassessment are a way out of financial distress, because home rule also eliminates the tax caps and reassessment would reset millage far below the cap.
In addition, a recent revision of the Third Class City Code has added three mills to the general-purpose property tax cap.
But simply raising taxes isn't appealing, Kelley said.
"We've got to look at everything we have," Kelley said. "If we don't explore this, shame on us."
Council won't lease the system, however, if "the numbers aren't there," he said.
"To a lot of folks, [the plan] is a shock to the system, I know," Kelley said.
"It's a shock to us, trust me," Lawruk said.
Mirror Staff Writer William Kibler is at 949-7038.