PA. Screws Financially Distressed Cities Yet Again - Prohibit Transfers from Water and Sewer Account

[JPZenger]

http://www.municipalauthorities.org/?page_id=1156

The PA. Legislature and Governor have yet again screwed over the many distressed cities in PA. A new law is going into effect that prohibits transfers of funds from water and sewage systems into municipal budgets. Many cities have stayed financially solvent by using excess water and sewage system funds to cover other municipal costs.

Reading for example is losing $5 million a year from their water system. Allentown and Easton also each have transferred money from their water and sewage accounts. For example, Allentown used water funds to pay for much of their park system (which helps to protect the water quality upstream of the intake).

This will have an unintended consequence - an increased number of cities will sell off their water and sewage systems to private companies, because there is no longer any financial motivation to retain ownership of them. For example, Allentown just approved a 50 year lease of their water and sewage systems (which serve most of the suburbs) to pay off their pension debts. Fortunately, in that case, the county authority was the highest bidder.

[djean111]

1. It seems a lot of GOP governors and Congressmen are competing for The Biggest Asshole award,

because they believe this is what will get them elected president in 2016.
Gonna be a nasssty few years. Well, nastier than before.

[wercal]

2. A different take

Years ago, our town (Topeka) was known to have a huge water and wastewater (sewer)fund...which was fairly untouchable.

However, over the years, it was dipped into for other projects. The wastewater fund was especially targeted...because the definition has morphed from 'sewer collection' to 'water pollution control'....and any variety of things can eventually be tied to WPC, parks is one example.

Another clever way to get these funds is PILOT...payment in lieu of taxes. The best example of this theory would be a city owned parking garage. Since the city doesn't have to pay its own property tax mill levy to itself, it has a competitive advantage over private parking garages, which isn't fair. So, the garage has to pay the equivalent of property taxes (out of its revenue) back to the city general fund, in lieu of taxes. This makes it fair and ensures that the city garage doesn't undercut the privately owned ones on price. Well, a few years ago, that theory was applied to the the water system - which now equals a huge transfer of funds from the water system to the general fund....even though there is no competing private water system.

Now those funds have no surplus. And all of the sudden, we are being hit with an aging infrastructure with hundreds of pipe bursts a year, and new water quality rules that cost money to comply with. And the funds have no money.

The city raised the rates - people watered their lawns less (and sewer fees are also tied to water use, so revenue for both funds stayed flat). So, we are pretty much in a pickle. Our rates are already substantially higher than that of other cities in the state...revenues are flat or declining, since we've hit a price point of diminishing returns...and the mains keep breaking. I know the person in charge of all this...and he really doesn't know how to fix it.

So, my suggestionn for cities that want to raid utility funds: Lower the water rate and raise the mill levy. That way, the appropriate taxes are being earmarked for the appropriate projects.

[djean111]

3. Thank you for explaining that.

I still mistrust GOP motives, though, can't help it.

[wercal]

4. I will say that this should be a local issue

So I'm not sure why the state is dictating how local funds are used.

My guess would be that state revolving fund loans have been used for sewer projects, and some cities are now defaulting on the loans...after having transfered funds out of the local sewer funds and into the general funds.

I could see how the state would try to protect itslef from this - its not like they can repo a sewer line.