The board of directors for the Bucks County Water and Sewer Authority revealed Wednesday morning that they are moving forward with exploring a plan to sell a large portion of their system to a for-profit company.
Benjamin Jones, the CEO of the Bucks County Water and Sewer Authority, said the offer from Aqua Pennsylvania, which is owned by Essential Utilities, to sell the largest part – the sanitary sewer system – under the public authority’s purview is worth $1.1 billion.
The deal isn’t finalized, but the board Wednesday morning approved an agreement to continue talks exclusively for one year with Aqua Pennsylvania and formally solicit public feedback.
“While we take these next steps, it is important to know that we have not made a final decision on the acquisition offer,” John Cordisco, an attorney and chairperson of the Bucks County Water and Sewer Authority Board of Directors, said in a statement.
The agenda for Wednesday’s meeting didn’t list the vote on the agreement for the authority to consider Aqua Pennsylvania’s offer, but the board took a vote to add it during Wednesday’s meeting, which drew ire from some in the audience who questioned why the public wasn’t made aware in advance.
Under the proposal, the Bucks County Water and Sewer Authority would retain ownership of the water system, but sell the sewer system that serves several retail and wholesale customers across the county to Aqua Pennsylvania.
Jones told LevittownNow.com the authority received a similar but slightly smaller offer from Pennsylvania America Water. There were also lesser offers from Bernhard Capital Partners and NextEra Water, which recently made a deal to purchase Towamencin Township’s sanitary sewer system despite strong local opposition.
The deal would be the largest one of its kind in Pennsylvania and possibly the nation, people close to the deal said.
If it the sale is agreed to and approved, Aqua Pennsylvania will hold rates for sewer customers served by the Bucks County Water and Sewer Authority for a period of one year.
Public authorities and private utilities have different motives. Public authorities are created to serve the ratepayers, while private utilities serve customers but also investors and are focused on profits.
At recent Bucks County Water and Sewer Authority meetings, there has been public comment urging the board of directors to not consider a sale.
The deal is expected to receive significant pushback from many municipal leaders and activists, who are concerned over private companies’ track record of jacking up rates on customers after purchasing public utilities.
Currently, Bucks County Water and Sewer Authority sewer customers pay $48.18 for 4,167 gallons on average. Aqua Pennsylvania recently pushed a plan to increase sewer rates for several towns it serves, with no rate per 4,000 gallons used being lower than the Bucks County Water and Sewer Authority rate and the highest being $138.50 for 4,000 gallons used, according to Philadelphia Inquirer reporting.
Jones said an analysis by the Bucks County Water and Sewer Authority undertaken recently showed that in 10 years the Aqua Pennsylvania rate is projected to only be $20 more than the authority’s projected rate.
Bucks County Water and Sewer Authority’s sewer system will need costly infrastructure upgrades, including work to stop stormwater from infiltrating it, over the coming years, Jones said.
“These are real dilemmas and costs we’re going to face,” Jones said in a pre-meeting call with reporters.
Jones stated that Aqua Pennsylvania’s base of serving numerous communities across the state gives it scale and cost savings the authority can’t achieve. He also said the private utility could replace lateral lines for customers, while the authority isn’t able to do the work and customers have to shell out thousands of dollars from their pockets to get the work done.
About 75,000 customers have sewer service provided by the Bucks County Water and Sewer Authority.
Jones said the Bucks County Water and Sewer Authority and Aqua Pennsylvania have similar commitments to the community, and the authority believes they would be a good fit.
Since last year, rumors have swirled among some in local government about a possible sale of all or part of the system that serves 100,000 households and several bulk customers.
The Bucks County Water and Sewer Authority was chartered by the county in the 1960s and services many municipalities across Bucks County and a handful in Montgomery and Chester counties.
The Bucks County Water and Sewer Authority provides either retail or wholesale sewer service, which means they work with another system to process the waste, to customers in all or parts of Bristol Borough, Bristol Township Falls Township, Hulmeville Borough, Langhorne Borough, Langhorne Manor Borough, Middletown Township, and Penndel Borough. Bristol Borough’s system was recently purchased by the Bucks County Water and Sewer Authority for $50 million.
Because the authority is chartered by Bucks County, profits from any potential sale would be turned over to county government.
Jones said there is about $100 million in debt from the authority that needs to be paid off, meaning the county would see about $1 billion.
Cordisco, the chairperson of the Bucks County Water and Sewer Authority Board of Directors, said in his statement that the county could use the funds for what it sees fit, including paying down debt, halting tax increases for a period of time, or creating a fund to subsidize sewer rate increases.
With the sewer system being the largest portion of the Bucks County Water and Sewer Authority’s operations, Jones said more than half of the authority’s 114 employees would be offered jobs with similar pay and benefits at Aqua Pennsylvania. The other employees would remain with the authority to handle its water service customers.
Jones said there will be a series of public meetings and hearings to solicit feedback from the public on the proposed deal.
He told reporters the public input might bring up issues that weren’t thought of by the board.
A sale of the Bucks County Water and Sewer Authority’s sewer system to Aqua Pennsylvania will require tens of thousands of pages of documents for Pennsylvania Public Utility Commission review, according to Bucks County Water and Sewer Authority representatives.
If things going swimmingly for the plan, the soonest the sale could go through is mid- to late-2023.
Thanks to a 2016 state law that encourages the consolidation of smaller utilities by enabling private buyers to pay the higher “fair market value” of municipal utilities rather than the “book value,” Aqua Pennsylvania has made aggressive efforts to acquire more municipal water and sewer systems.
In spring, Cordisco confirmed to this news organization that Aqua Pennsylvania had submitted an “unsolicited” offer to purchase the authority in 2020. The current proposal grew out of that deal.
The offer in 2020 was for $600 million, but Jones said a full evaluation of the sewer system led to a higher appraisal that led to the $1.1 billion offer.
Jones explained that a sale would make the authority smaller, but it could be tasked with handling other issues, like stormwater in municipalities.
Below is the letter Cordisco will be sending to Bucks County Water and Sewer Authority customers:
To Those We Serve Across All Communities:
The Bucks County Water & Sewer Authority (BCWSA) has been serving municipalities across Bucks County and southeastern Pennsylvania for the last 60 years. We have a proven record of always putting our communities, customers and employees first in every decision we make.
With that core principle in mind, when we were presented with an initial acquisition offer for BCWSA, we had a fiduciary responsibility to examine every detail and determine the most beneficial decision for all concerned. The process included obtaining an assessment of all our operations, services, assets and any other resources that are part of BCWSA. A significant component of our analysis entailed ensuring that our customers would have rate protections, municipalities and their taxpayers would realize financial benefits, programs would remain in place to achieve the highest environmental standards, and no current and former employees’ pay and benefits would be negatively impacted.
After agreeing to our terms, we received a formal offer of $1.1 billion from Aqua Pennsylvania to acquire our wastewater operations only. (BCWSA would continue to own and provide water service.) Receiving the formal offer allows us to present it to the public and receive feedback. While we take these next steps, it is important to know that we have not made a final decision on the acquisition offer. We want stakeholders, ratepayers and community members to have an opportunity to review the terms of the agreement that would provide:
· Customers – We anticipate the sale proceeds could be contributed to a fund to minimize rate increases over the next 10 years, including a complete rate freeze in the first year. The sale of only our wastewater operation means significantly lower rate increases, estimated to be less than $20/month more by 2033. Low-income residents will continue to have access to grant or discount programs to help pay bills.
· Community – Bucks County government and its residents will receive about $1 billion in new revenues from the sale proceeds. Along with creating a fund for customers, the county can allocate the money for needs that it deems appropriate, such as eliminating its debt, freezing any tax increases over an extended period of time, and other essential needs to benefit residents. Operations at BCWSA’s current headquarters will continue for at least 25 years.
· Employees – All employees (union and non-union) will maintain their jobs based on current salaries and collective bargaining agreements. All pension plans will remain intact and existing employee benefits will be maintained.
· Environmental – Aqua Pennsylvania will assume all necessary permits to operate the systems and assume all Pennsylvania Department of Environmental Protection (DEP) and U.S. Environmental Protection Agency (EPA) consents and orders related to the systems. Aqua Pennsylvania will also seek PUC approval for the ability to replace damaged customer wastewater laterals to address the stormwater inflow, which is something BCWSA is not permitted to do.
The benefits outlined above are terms that we required Aqua Pennsylvania to meet. They reflect our commitment to you, the customers and communities we serve. This announcement marks the first step toward moving forward with full transparency. We will be holding meetings for the public to ask questions to BCWSA and Aqua Pennsylvania representatives regarding the transaction and their services. The input received during these meetings will be part of any final actions involving this proposed acquisition. You can learn all the facts and stay updated at www.BCWSAcommitment.org. We look forward to hearing from you.
See also:
Editorial: Why We Decided to Sell Our Sewer System
Despite Vocal Opposition, Towamencin Supervisors Sell Sewer System for $115M in Historic 4-1 Vote
Towamencin Supervisors Vote 4-1 to Advertise Sale of Sewer System for $115M, Final Vote May 25
Letter to the Editor: Vote No on Selling Sewer System
Residents Speak Out After Towamencin Supervisors Signal Intent to Sell Sewer System
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)
