Towamencin Supervisor Majority Says They’re in Favor of Selling Sewer System Despite Opposition

Editor’s note: This article is part one of a two-part series documenting Wednesday night’s meeting and the public response to the supervisors’ announcement that they have a majority in favor of selling the sewer system.

Towamencin will likely proceed with the sale of their sewer system, after four out of five township supervisors made it clear during the second town hall session Wednesday night that they are in favor of selling township’s sanitary sewer system for $115.3 million to highest bidder NextEra Water, a subsidiary of NextEra Energy.

A major benefit of the sale in supervisors’ eyes: A potential increase of the Homestead Exemption from $50,000 to $76,000, equating to an additional $130 in tax reductions per eligible property owners.

Six months ago, NextEra Energy announced it plans to buy up municipal and privately-owned water assets, similar to how it spent $45 million to buy numerous regulated water and wastewater utility assets in eight Texas counties, according to Bloomberg.com.

Scott Shearer, of Professional Financial Management, said the township will gain $87 million in estimated proceeds for its capital reserves after using $33.3 million at settlement. As the consultant hired to oversee the valuation and analysis of the sewer sale, Shearer will benefit from the eventual transaction.

“The sanitary sewer and all the equipment would go over to the buyer. Everything would be transferred, and service will continue as the current ownership, but under a different name,” Shearer said. “There will be no change in services provided.”

Along with $5 million in-hand, the $115.3 million purchase brings total sources to $120.3 million, Shearer said. The township can pay off $9 million in sewer debt, pay off $10 million in other debt, fund $7.5 million in pensions and other post-employment benefits, use $5 million to jump start priority projects, and pay $1.8 million in fees and contingencies.

“That leaves $87 million for the township to re-deploy and putting money in reserves,” Shearer said, adding there is a three percent interest earning rate over the life of the fund. “The goal would be to establish those reserves as such that those interest earnings can be used toward capital projects.”

Of that $87 million, the township can establish reserves to fund projects for township facilities and major equipment purchases at $15 million, fund fire services, infrastructure and equipment at $10 million, fund parks and open space for $20 million, apply $20 million for stormwater upgrades, and apply $22 million to transportation projects. Shearer said the township can see an annual budgetary savings of about $1.245 million by paying off debt and liabilities.

Open space funds can go toward land acquisitions, $50,000 for annual TYA baseball field improvements, and $50,000 a year for community pool infrastructure, Shearer said. Stormwater upgrades include funding the township’s share of the Skippack Creek Alliance Pollution Reduction Plan, completing a 10-year strategic stormwater management plan, and replacement of 150,000 linear feet of corrugated storm water pipe, he said. Fire service funding can go toward the main fire station replacement and upgrades, and pumper and rescue truck replacements, Shearer said.

Transportation funding, Shearer said, generated by $660,000 in interest per year alone, includes planned intersection improvements at Welsh and Orvilla roads, and the Valley Forge Road, Troxel Road, and Kriebel Road intersections along Sumneytown Pike.

The cumulative net impact to a household over a 10-year period between the township keeping the system and selling the system was roughly a $4,000 delta on a per year basis, Shearer said.

“With evaluating all the different proposals and having discussions with the sewer committee and team, the offer by NextEra would allow the township to be able to move forward with all the initiatives it plans to do not only in the near term, but in the long term for years to come,” Shearer said. “The position the committee and the rest of the team has taken is to move forward with that.”

Supervisors are expected to pass an ordinance approving the sale at the May 11 meeting, and then approval final sale May 18.

Supervisor Rich Marino told the public he was surprised to see two bids over $90 million for the sanitary sewer system. The lower bids, he said, did not do it for him.

“To me,” Marino said, “it’s about the numbers. Those numbers in black and white mean a lot. Looking at the financial challenges that we face in the township, we’re not in bad shape, but we could be in better shape.

The NextEra offer, he said, gives Towamencin a generational opportunity to reboot and reset its finances for the foreseeable future.

“The township would be in an outstanding position to meet obligations and maintain the infrastructure of the township,” Marino said. “This is an offer I cannot refuse and one I enthusiastically support.”

Supervisor Laura Smith told the public that, at first, she did not want to sell the sewer. Then, she approached the topic as an elected official and put her personal opinions aside. She said she too was surprised by the high bids for the system.

“When I see the top two (numbers) and recognize what we can do for our residents now … So many people come to us saying ‘I want basketball courts, I want pickleball courts, TYA needs more things,’ we don’t have the money for that,” Smith said. “We don’t have a Hatfield Quality Meats in our township, we don’t have Merck in our township. We have three high schools in our township. We don’t have the cash cow other municipalities have.”

Smith said part of the $87 million reserves can go back into the parks.

“With that $87 million you see up there, that remains untouched for perpetuity, and we’ll be able to operate off the interest. So we can keep your taxes in line. When other townships are going to be raising taxes, we’re going to be solid,” Smith said. “Things can be great here and your property values will rise, so you get something for this. We could leave it be, taxes will rise and everything stays the same. We sell, they get better.”

Supervisor Joyce Snyder – the sole Democrat on the board – said she did not have an open mind about the sale.

“I campaigned on the idea that this was a bad idea. I get the idea that $115 million could do a lot for our township. I want to keep our sewer,” Snyder said. “I too would like a check for $115 million. We need new fire equipment, and we need better things in our township. What I’m saying is $115 million for our sewer is an incredibly high interest loan and I do not think it makes sense.”

Supervisor Kristen Warner, a 25-year resident of the township who was elected in November, said she went into the sale without an understanding of the issue at-hand and ended up making her own decision. Warner said she got the numbers in February, the same time as everyone else.

“I asked my husband’s opinion – he’s a CPA – on what would he do. My husband deals with a lot of high income clients and I said, ‘If this was your client, what would you advise?’ and he looked at me like I had 10 heads,” Warner said. “It’s a no-brainer as far as numbers go. We should do this. When it comes time, I will vote to sell the sewer.”

Supervisors Chairman Chuck Wilson, a 40-year resident of township and 20-year member of the board of supervisors, said he was for moving forward with the sale.

“Where some people view the sewer system as our biggest asset, it’s also a liability,” Wilson said.

Wilson warned there was an environmental liability with the sewer system, specifically increased fines for polluted discharge, such as the case in 2006 when the Upper Gwynedd treatment plant had a discharge that caused a significant fish kill, of which Merck took responsibility for because it was the source of the problem, and settled with the EPA for more than $20 million in fines. Wilson said the sale would also support fire services, especially in a time when volunteer fire companies are facing severe crises in recruiting and retaining volunteers and spending more money on equipment.

“I too was very surprised with what the bid was. As a matter of fact, I was concerned up to the day bids came in that we received a bid worthwhile to pursue this. It’s just a no-brainer,” Wilson said. “This is a new start for the whole community. It’s a huge plus for the community to be able to pay off all the debt, and create space in the annual operating budget to do other initiatives and meet the future needs and costs, and then have $87 million in the bank that will generate interest to do all the projects that need to be done. It increases the quality of life in Towamencin.”

NextEra’s offer was $23 million more than the next highest bidder PA American Water. NextEra Water President Bruce Hauk told the public Wednesday night that NextEra does not expect to recover the full amount of the proposed purchase price. According to its bid, NextEra anticipated that “the fair market value appraisals will be lower than our proposed purchase price, and therefore, future rates would not reflect a return on or of the full purchase price.”

The NextEra deal comes with a 2-year rate freeze. Indicative rates for the next 10 years, based on a monthly billing cycle, range from $37.50 in Year 1, to $88.40 in Year 10. Indicative rates for the next 10 years, annualized, range from $450.00 in Year 1 to $1,060.80 in Year 10. By 2025, rates could jump to $653.64 at the face amount, and township ratepayers could be shelling out as much as $1,036 by 2027.

However, NextEra cannot guarantee rates, as those are done at the discretion of the Public Utilities Commission.

Shearer said 14 current wastewater treatment plant employees would be offered employment with NextEra Energy. Those working for the township that serve in the collection system will be “re-deployed” to other maintenance projects in the township, like streets or park maintenance, he said. However, a US Water employee will be placed in a managerial role in Towamencin.

Reaction to the decision to sell the system was swift from the public, including residents, ratepayers, and members of Towamencin Neighbors Opposing to Privatization Efforts, who immediately decried the majority decision to sell and expressed concerns about accountability, rate increases and other issues. A second article will be coming later today encapsulating that public response.

See also:

North Penn Says Proposed Towamencin Sewer Sale Would Have Minimal Impact on District

To Sell or Not to Sell: Towamencin Board to Decide Sanitary Sewer Fate in May

Towamencin Inches Closer To Possible Sewer Privatization With Feb. 11 Bid Deadline

Editorial: Selling the Sewer System Would Be Bad for Towamencin (and Elsewhere)