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Allentown City Council Rejects May Referendum on Water Lease

The Allentown, Pa., City Council beat back a bid to forestall plans to lease out the city’s sewer and water systems.

The council Tuesday night rejected a proposal to set a binding May referendum for Mayor Ed Pawlowski’s planned 50-year lease of water and sewer systems, for which the city is soliciting bids.

Pawlowski, who has called pension liability “a 500-pound gorilla” on the city’s back and for which he is blaming previous administrations, estimates the public-private partnership could enable the city to pay $150 million to $200 million to replenish the police and fire pension system.

The mayor, in a presentation selling the deal, called pension overhaul “the single most important issue confronting us,” adding: “When you look at the actual financial foundations of the city, they’re cracking. And they need to be rebuilt.”

The council’s 6-to-1 “no” vote against the referendum at the special meeting matched the vote margin in late October that authorized Pawlowski to seek requests for qualifications. Councilwoman Jeanette Eichenwald in each instance voted no. Tuesday’s measure would have required a referendum on sales or leases of city assets exceeding $10 million.

Prompting the special meeting was a petition with more than 4,500 signatures in favor of a May referendum. While the council rejected a binding referendum, the question will still go on a ballot for consideration in May, and possibly for a vote in November to change the city’s home-rule charter.

The city hopes to finalize a water and sewer deal sooner than that, although a Pawlowski spokesman on Wednesday had no timetable.

“The city is still interviewing the firms who were approved in the RFQ process. The city and the firms continue to perform their due diligence,” said communications director Mike Moore.

The RFQ generated formal responses from Aqua Pennsylvania, American Water, Lehigh County Authority, NDC Housing and Economic Development Corp, United Water, Access Capital, Corix, Allentown Forward and Macquarie.

According to city officials, Allentown, a 119,000-population city in Lehigh County, must “drastically” reduce its pension liability or in less than three years, its minimal obligation will exceed $23 million annually, or roughly 25% of its general fund budget.

Last year, Allentown lost one-third of its fire department when 42 of 140 firefighters retired on Dec. 31, 2011, to take advantage of a generous pension provision before it expired.

Benefits to the water project, officials say, also include eliminating about $30 million of water and sewer debt, negating the need for passing consecutive years of large tax increases, and Allentown receiving ongoing revenue-sharing payments to offset costs now funded by the water fund. They also say the move would eliminate the earned-income tax imposed on residents and non-residents.

In a letter to City Council President Julio Guridy, Pennsylvania Economy League president Gerald Cross underscored Allentown’s need for pension relief.

“In recent years, unlike many of its peers, the city of Allentown has been able to meet its operational obligations without dramatic tax increases. They city has accomplished this, however, only by utilizing available account balances that are now virtually depleted,” Cross wrote.

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