The heads of North Penn and North Wales water authorities have joined together with the current director of the Pennsylvania Municipal Authorities Association (PMAA) to speak out against the privatization of public water and sewer systems and the consequences of Act 12, which is argued to benefit corporate investors, who control fair-market value.
On May 31, a five-page letter to Bucks County municipal and community leaders signed by North Penn Water Authority Executive Director Tony Bellitto, North Wales Water Authority Executive Director Robert C. Bender, and PMAA Region 1 Director Michael K. Sullivan discussed impacts of privatizing publicly owned sewer systems and why the trio were not in favor of it.
Towamencin Township is not the only municipality to either sell off its sanitary sewer system or evaluate the benefits of such a sale. Right now, Bucks County is considering a $600 million offer from Aqua Pennsylvania for the purchase of its entire sewer system aka the Bucks County Water and Sewer Authority. However, the authority, which is $232 million in debt, believes its assets are worth $1.4 billion. The sale would affect 100,000 households in Bucks, Montgomery, and Chester counties, per the Inquirer.
In other Pennsylvania communities, a York County city sold its sewer system in April to Pennsylvania American Water for $235 million, and Cheltenham sold its sewer system in 2019 to Aqua Pennsylvania for $50 million. Like in Towamencin, a NOPE coalition was formed in Cheltenham to stop the sale.
“Municipal Authorities were first created by the Pennsylvania Legislature in 1935 primarily to facilitate the financing and public ownership of various public utilities and operations necessary to provide necessary public services - such as water and sewer systems, airports, and similar functions of public benefit,” the letter said. “The law has been amended from time to time over the years to address changing needs. However, Pennsylvania Municipal Authorities continue to operate as a not-for-profit entity for the sole purpose of providing essential public services.”
The authorities, the letter said, operate “with long-term stability, typically without influences from political interests or corporate influences.”
Everything was fine for nearly 100 years, and then, according to the letter, the State Legislature adopted an “innocuous” bill known as Act 12.
“Simply stated, Act 12, is a 2016 state law that allows investor-owned utilities to pay a higher "fair-market" value for municipal water and wastewater systems and recover the entire sale price from their customers through higher rates,” the letter said.
Now, according to Bellitto and company, the highest bidder sets the fair-market value.
“Since the enactment of Act 12, the rules of the game have dramatically changed. Currently, publicly owned water and sewer systems can be sold without customers' approval - at what is called a ‘fair market value,’” the letter said.
Before Act 12 was in existence, utility customers were protected from overbidding by corporations. Sales had to be at an appraised value, per the letter, which provided a level playing field between nonprofit systems and privately-owned moneymaking entities.
With privatization, that valuation is at risk.
“It means that several for-profit Corporations - often called the ‘Profiteers’ - have discovered that private ownership of community water and sewer systems is very lucrative, providing never-ending profits for the Corporation and their investors,” the letter said.
Under the new law, profiteers have unlimited power to bid up the purchase price regardless of the appraised value.
Then, the corporations are “entitled” to increase rates to cover the full purchase price investment.
”The incredible result is that the more they pay for the system, the higher they can raise customer rates – and the more money they make. They do not spend anything to acquire the systems – the customers ultimately pay it!” said Bellitto, Bender and Sullivan.
Read the letter in its entirety here.
“We believe that publicly owned water and sewer systems are much too important to be bought and sold like common commodities - or to be controlled by Wall Street interests and never-ending corporate profits,” the three summarized in their letter. “We believe that instead of sacrificing public ownership and local control, these systems should be held and operated in a perpetual public trust – to be protected and handed down to our children and their children.”
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
With System Worth More Than $1 Billion, Bucks County Water & Sewer Authority Evaluating Offer
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)
