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Brigid Sullivan
February 21st, 2013

Allentown, PA

In the summer of 2012, Mayor Ed Pawlowski proposed leasing the city’s water and sewer system for 50 years possibly to a private entity. Less than a year later, in April 2013, the Lehigh County Authority — a public, nonprofit entity overseen by an appointed board — won the deal for the system, outbidding United Water and American Water. 

Although this outcome is not perfect, Allentown residents have been saved from rate gouging and other poor practices of the private water companies who bid on their system. It also highlights how private companies just cannot compete financially with nonprofit public entities. Because the Lehigh County Authority had access to low cost public borrowing and because it did not have to make a profit, the authority was able to bid substantially more than the private companies while offering a better benefit package to the water workers. The authority will keep the water workers’ pensions, which would have been lost with privatization. 

Throughout the process, Food & Water Watch, along with an assortment of local allies, sought to shed truthful light on the ill-conceived privatization plan by filing information requests, producing independent cost analyses and publicly challenging the administration’s mistruths.

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A Costly and Risky Proposal

In 2012, confronted with fiscal difficulties related to steep pension costs for the police and fire departments, Allentown Mayor Ed Pawlowski proposed the long-term lease of the city’s water and sewer systems. This is a shortsighted idea that would end up costing Allentown families for generations.

Pawlowski claimed that because the 50-year lease would generate much-needed funds without a tax increase, “… the burden of the debt is not paid for by the residents of Allentown.” This was simply untrue. Although taxes themselves may not increase as a result of the deal, families would indeed pay more to cover the cost of the lease, through steep increases in their water bills. The plan was what you might call “a tax through the tap.”

Pawlowski’s administration consistently sought to mislead the public about the true public cost of the plan through incomplete, inaccurate and just plain false analyses.

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The Public Has a Right to Know

Complicating matters for Allentown residents, the Pawlowski administration was extremely secretive about every step of the process. It hampered Food & Water Watch’s efforts to undercover more information about the companies that were interested in Allentown’s water and sewer systems, refusing to disclose the responses to the request for qualifications for the water and sewer concession until after the lease was awarded to the Lehigh County Authority.

Before the contract was signed, the mayor’s administration provided the public with very little information about the companies that sought to take over the water and sewer systems. It refused to reveal the full identities of each bidding team. Many of the private sector teams included a company that would have operated the systems and an investment company or consortium that would have financed the deal. The financier would have been the one making the big decisions and could have hired and fired the operator. 

For example, we later learned that United Water, a bidder, partnered with private equity firm KKR, as it did in Bayonne, N.J. And Access Capital Advisers partnered with Severn Trent Services. 

The public had a right to know what entities seek to control their essential water and sewer services, and why those entities believed they were qualified to run the systems. If the mayor’s administration supported the possible privatization, why didn’t it tout the companies’ purported qualifications? It really made one wonder what the mayor was trying to hide. 

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Let the People Vote

Allentown elected officials, community leaders and advocates sought to ensure that the people get a say on the mayor’s plan. In Fall 2012, they formed a petitioners committee to collect signatures to on a proposed charter amendment that would require voter approval before any major lease or sale of public assets. Despite opposition from the mayor, they collected more than 4,000 signatures — twice as many as needed to put the proposed amendment before voters at the next election.

In January 2013, the city council refused to adopt the ordinance, sending it to the May 2013 ballot, but because of technical differences between the city’s petition process and state law, the county clerk was unable to put the question on the ballot. 

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Strong Public Opposition
 
The possible privatization of Allentown’s water and sewer systems generated stiff public opposition — from city residents, municipal workers and neighboring communities.
 
Many Allentown residents opposed leasing their water and sewer systems, and dozens attended city council meetings to challenge the plan. Among other concerns, they worried about how privatization would have affected the quality and affordability of their water and sewer service.
 
SEIU, the union that represents the local municipal employees, came out strongly against the possible privatization because it would have cost the water system workers their pensions. The union felt betrayed by the mayor after his administration changed the proposed contract for the private bidders to take away the water workers’ pensions, even though the mayor had promised that deal would not harm the workers’ jobs or benefits. Unlike the other private bidders, the Lehigh County Authority will keep the pension plans for the water workers. 
 
Several municipalities that receive bulk water or wastewater treatment from Allentown were also worried about how privatization would have changed the cost and quality of their service.
 
Several municipalities and organizations sent letters to the city council expressing concern about the possible privatization or passed resolutions against it:  
 
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