The majority of Towamencin Township Supervisors made it known Wednesday night that they intend to sell off the sanitary sewer system and all its components to NextEra Energy for $115.3 million, and it did not sit well with residents who are against the sale — many claiming they will make their feelings known at the polls or, in the case of Clemens Food Group, send its sewage flow elsewhere to avoid paying more than $1 million in sewer fees.
Resident Kofi Osei, who spearheads the Facebook group Towamencin Neighbors Opposing Privatization Efforts, or NOPE, asked consultant Scott Shearer of PFM, the firm tasked with valuation and analysis of the sanitary sewer system, to summarize its firm’s standard disclosure. Shearer said the disclosure states that the analysis was done in a due diligence process and that all numbers and analysis is done to the best of the firm’s ability.
“Estimates and things change in the future. Obviously, we can’t guarantee to the penny,” Shearer said.
“Lots of words, no guarantees,” Osei said. “No one in their right mind would make a decision like this without guarantees.”
Osei picked out each supervisor and hoped they would make the right choice for the township.
“Chuck,” Osei said, addressing supervisors Chairman Chuck Wilson, “I think your political career should be over here. Just to explain for the audience, when Scott says ‘the sewer committee,’ Chuck Wilson is the only supervisor that has been on the committee through the whole process. When he says ‘sewer committee came to this recommendation,’ it means Chuck Wilson came to this recommendation.”
Resident James Collins was furious that the process did not involve the public on a grander scale.
“Two years! Two years they’ve been talking about this,” Collins boomed. “How many of you knew about this two years ago? How many candidates came to you and said, ‘I plan on selling your sewer?’ Not one! Now we’re two weeks away from May when they’re talking about selling our sewer. Now all of the sudden tonight, we’re going to hear what their position is and where they are.”
The crowd applauded Collins and then he asked what business sells an asset so it can take care of other liabilities.
“The only way to do that is if you’re going out of business. If you guys came up and said, ‘Hey guys, we’re broke. We’re in trouble. We have to start selling stuff off.’ That’s a whole different conversation,” Collins said. “But we’re now having conversations about how star-spangled awesome it will be to start selling off assets.”
Collins said the residents are in a democracy where five elected officials did not tell the public what is going on.
“This has been a colossal waste of time and a colossal waste of money. If we were serious about this, nobody here is excited about it,” he said. “If we had been included, and not been treated like we were idiots, and had been told all along the way, it might be a different outcome.”
Shearer said NextEra does not expect to recoup its $115 million purchase price. He said there is a process that has to be followed where an engineering assessment has to be done, and then the township and NextEra would each hire its own independent utility evaluation expert. Then, those agents will take the report the township engineer did, use it for their valuations, and then that can be factored into the rate base.
“The PUC has its ability to make its own analysis (on the system) and make its own adjustments as far as what can be recouped in a rate base,” Shearer said.
Jonathan Maloney, of Reiff Road, asked if NextEra was in partners with Black Rock. NextEra Water President Bruce Hauk said he was familiar with Black Rock Investment.
“Are you aware there are multiple states that are divesting from Black Rock, and they are buying the waterways and developments, houses $50 million more than they are worth. Are you aware of that? You are part of the problem. So, you are not buying the sewer, you are buying the rights to the water,” Maloney said.
Resident John Dukes told the audience he worked for the PUC for 30 years, and if anyone thinks it is a protective agency, then they are crazy.
“All they do is file these rates and go before politicians and determine what it is. I ask you, why are we selling this thing? This is a goldmine. Why are you doing this now after Dan Littley and Jim Sinz left? There’s something real dirty here. Real dirty!” Dukes said.
Resident David Martin asked Shearer who the “team” was that determined the sale of the sewer system. Shearer said the team was comprised of township solicitor Jack Dooley, the township engineer, special counsel, and township administration, which is overseen by Manager Donald Delamater.
Martin told Hauk that his company’s client service rating was very low, and said it raised doubt in him that Hauk did not know that fact.
“You’re going to spend $150 million and tell us that you’re trying not to recover that? That does not sound to be very genuine,” Martin said. “As a publicly traded company, you’re not looking to make a profit?”
Hauk said it was put in writing in the bid.
“We are a publicly traded company with earnings regulated by the Public Utilities Commission. We’re not a free market enterprise,” Hauk said.
Martin said the township should not divest its valuable property.
After supervisors spoke on their opinions on the matter, Osei got up to ask how selling the sewer system was cheaper than a bond issue.
“How is the township spending cheaper this way?” Osei said. “You’ve done your due diligence. Answer yourself.”
“What was the question?” Wilson asked.
“How is the township selling cheaper to us as residents than borrowing?” Osei said.
“We’re not borrowing,” Wilson said.
“If we kept the system, we’d have to borrow $40 million by Year 10. How is that more expensive than taking $115 million loan from a for-profit company?” Osei said.
“I don’t understand your question,” Wilson said. “Of course you don’t,” Osei replied.
Supervisor Kristin Warner tried to clarify the question. “If we have to take a $40 million loan, then we’re $40 million more in debt,” she said. “Right, that’s at two percent. $115 million at nine percent. How is that cheaper?” Osei said. “The $115 million is money we have to pay in rates. How is that cheaper than $40 million with government loans?”
“It’s not a loan to the township,” Warner said.
“It’s not a loan to the township, but it’s a loan to ratepayers,” Osei exclaimed. “How is it cheaper?”
Wilson said the analysis showed that it was cheaper to the taxpayer and resident.
“And I don’t know what else to say about it,” Wilson said.
Osei asked if it is guaranteed that the interest earnings will be used for future projects.
“No one can guarantee anything. It’s hard,” said Supervisor Rich Marino. “Who would have predicted eight percent inflation? We worked with the best information we had at the time. (These numbers) are not wrong. You can disagree with us all you want.”
Jim Lee, general counsel of Clemens Food Group (CFG) in Hatfield Township, a company that has been in the area for 126 years and is in its sixth generation of business, said CFG is one of the largest customers of the township municipal authority. Lee said Clemens Food Group discharges 241 million gallons annually to the township sewer facilities and pays about $850,000 a year in sewer fees. CFG, he said, has also contributed to improvements on Forty Foot Road and put a lot of taxes into Towamencin Township.
“We have been monitoring the potential sale of TMA’s facilities and we are concerned the sale will ultimately result in significantly increased rates, not only for residents, but local businesses,” Lee said. “This is all based on recent trends. We all know what happened in Limerick and Cheltenham, and it sounds like it’s going to happen here in Towamencin.”
“Given such trends, and the return guaranteed under the law of nine percent on investment, we believe that our rates will likely double to $1.6 million, which would significantly impact our operations in Hatfield,” Lee said. “We want to advise the township and the residents that if this sale does go through, and the rate does increase significantly, we are looking at all options to reduce or eliminate our flow to TMA.”
Lee said when that money goes out, NextEra will have to spread the cost to the residents.
“We don’t believe the numbers shown have been accurate,” Lee said. “We are fortunate to look at options to reduce our flow, residents are not.”
A few residents had their minds changed about the sewer sale upon learning of the benefits of the $87 million reserves that would result from the sale. One of those was Dr. Rich Costlow, who said he was initially strongly against the sale of an asset that he thought would improve in value.
“Having seen the numbers, there’s no way this board or future board is going to increase taxes to get an $87 million reserve fund. I think this bid represents a substantial increase over what the board might have done to do this in the way of raising taxes,” Costlow said. “We are looking at a substantial capital reserve for the township. My sewer rates were going to go up anyway to pay for $50 million in improvements. I’d rather see my rates go up for the sewer and have my township have an $87 million reserve in order for them to do the things I want to see.”
See also:
Towamencin Supervisor Majority Says They’re in Favor of Selling Sewer System Despite Opposition
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)
