City’s sewage system to be sold for $156 million
The Municipal Authority of the City of McKeesport has agreed to sell its sewer system to Pennsylvania American Water for approximately $156 million.
The sale is needed to put the city on more stable financial ground and avoid Act 47, the program for financially distressed municipalities, or municipal bankruptcy, Mayor Michael Cherepko said at the Sept. 7 council meeting.
“It became very clear to this administration that the only way to save our community from municipal bankruptcy, while continuing to offer the same level of services our residents deserve, would be to transfer our local sewage system to a regional or national utility company,” Mr. Cherepko said in a news release.
A purchase agreement was signed by both parties last Friday following votes by city council and the municipal authority to sell the system.
The sale is expected to be completed in the second half of next year pending regulatory approvals and other closing conditions.
The system serves 22,000 customers in McKeesport, Dravosburg, Duquesne, East McKeesport, Elizabeth Township, Glassport, Liberty, Lincoln, North Versailles, Port Vue, Versailles and White Oak.
“We look forward to closing the proposed acquisition and to providing wastewater services that reflect our commitment to environmental stewardship and quality customer service,” said Kathy L. Pape, president of Pennsylvania American Water. She said that after the deal is closed, the company looks forward “to welcoming the Municipal Authority of the City of McKeesport’s employees and customers to the Pennsylvania American Water family.”
The next step is approval of the acquisition by the Pennsylvania Public Utility Commission along with other approvals, such as from the state Department of Environmental Protection.
In June, state Auditor General Eugene DePasquale said McKeeesport erred when it accidentally spent $729,275 in state funds earmarked for pension costs and subsequently couldn't pay its $2.3 million annual pension obligation last year.
McKeesport officials said then they would remedy the shortfall through “the sale of an asset in the near future.”
“The total proceeds of the pending sale of the Municipal Authority of the City of McKeesport will solidify the City of McKeesport’s financial position for years to come,” Mr. Cherepko said this week.
“The down payment associated with this sale will generate enough revenue to cover all of the city’s outstanding financial obligations, including the minimum municipal obligations associated with the city’s pension funds.”
The city's aggregate unfunded pension liability increased from $7.6 million in 2009 to $9 million in 2013.