Wednesday, April 30, 2008

Competitive Bid raises its head -- again -- but winks, blinks and nods prevail

Pittsburgh's water authority ups debt - Pittsburgh Tribune-Review: After meeting with PNC and authority representatives, council members questioned why the financial work was not competitively bid.

'I don't think that it's been the policy to bid these out,' said State Rep. Don Walko, the authority chairman. 'I think you just try to find the best team.'

Walko said PNC and JP Morgan assembled the authority's separate $25 million bond refinancing in 2007 and that using the firms again would save money.
City Council had them right where they wanted them. City Council folded.

Well, there is always next time. But next time in this instance is in 2042, give or take a decade.

City council blew it. None even asked a question on the day of the final vote. It was a slam dunk to get more debt.

The 'consent decree' to fix the storm water run off calls for certain measures to be made. Little has happened. Why?

Stewardships. Management. Accountability. Solvency.

The PWSA came about when Tom Murphy hatched an idea for a one-time fix of cash. All the Dems when along with it then. All the Dems sustain it now. Meanwhile, the water main breaks around town are everywhere.

1 comment:

Anonymous said...

Pittsburgh's water authority ups debt $100 million for overhaul
By Jeremy Boren
TRIBUNE-REVIEW
Wednesday, April 30, 2008

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A proposed $125 million overhaul of Pittsburgh's aging water and sewer system is little more than one-tenth of needed upgrades, but it would balloon the authority's debt for future generations, city officials said Tuesday.

"It's very much needed, and we know this money is going to be spent because we're finding problems all the time," said Michael Kenney, executive director of the Pittsburgh Water & Sewer Authority.

He said the authority has little choice but to increase its debt of $549 million to about $649 million, assuming the authority's board approves taking on $100 million in additional debt and refinancing existing bonds to save $25 million. The board meets May 9.

"This is the way it's done. Most water systems cannot raise the cash to take care of the infrastructure on operating revenues, so they go to bond. That's how they raise money," Kenney said.

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Kenney said financial adviser PNC Capital Markets, underwriter JP Morgan and consultant Merrill Lynch would help engineer the deal. PNC spokesman Fred Solomon said the schedule of fees to be paid to each firm hasn't been prepared.

City Council unanimously approved extending the authority's legal lifespan seven years, so it could extend its annual debt service payments of about $42 million a year from 2033 to 2040.

After meeting with PNC and authority representatives, council members questioned why the financial work was not competitively bid.

"I don't think that it's been the policy to bid these out," said State Rep. Don Walko, the authority chairman. "I think you just try to find the best team."

Walko said PNC and JP Morgan assembled the authority's separate $25 million bond refinancing in 2007 and that using the firms again would save money.

"When I look at JP Morgan, I look at the best," Walko said. "And I don't get any campaign contributions from them or anything."

Walko said he plans to vote to extend the debt because he believes the water and sewer system needs about $1 billion in improvements. "We'll need way more (money) down the road," he said.

The authority's plan to push debt obligations further into the future will spare customers from an immediate rate increase, said Pittsburgh Finance Director Scott Kunka.

Kenney said he doesn't expect customer rates to rise in 2009, but wouldn't rule out future hikes.

The authority raised its rate every year, from $4.34 per 1,000 gallons in 2002 to $7.50 per 1,000 gallons in 2007.

A large part of the $100 million in new bond debt and $25 million saved through refinancing will pay for a $43.65 million upgrade of the authority's water treatment plant near Aspinwall.

Much of the rest will go toward replacing 25 miles of the authority's 900 miles of water mains and roughly 26 to 39 miles of the 1,300 miles of sewer lines and catch basins in the city, Kenney said.

The upgrades would happen in the next five years, if the authority's board approves.

City Councilman Bill Peduto and Council President Doug Shields lamented that debt-laden infrastructure improvements will bring diminishing returns as the city's population decreases and there are fewer customers to charge.

"The very system that we have is not sustainable," Peduto said. "Our infrastructure is so old ... we're just going to keep doing this, putting more and more debt on and raising rates continually. Nobody is going to save the city."

One solution might be making the city's water and sewer system into one that serves many Allegheny suburbs, Kenney said, noting the authority is running "gravely under-capacity." The treatment plant capacity is 120 million gallons a day, but it puts out 70 million gallons a day.

"We are positioned to become a regional water and sewer provider," Kenney said.

Jeremy Boren can be reached at jboren@tribweb.com or 412-765-2312.