NEW BUYER OK’D
Home rule question in the primary could stop the deal
TOWAMENCIN >> A new buyer has been approved for the township sewer system, while residents continue trying to stop the sale.
Towamencin’s supervisors voted four-to-one on Wednesday night to change the buyer in the sewer system deal, and residents opposing the sale urged voters to take to the polls in May to stop it.
“The assignment agreement will assign NextEra’s interests in the asset purchase agreement to PA American,” said supervisors chairman Chuck Wilson.
“This assignment, if approved, merely allows PA American to step into the shoes of NextEra, under the APA as amended. The result of this assignment is not changing the outcome that was presented publicly last year,” he said.
In May 2022 the supervisors voted four-to-one to sell the township’s sewer plant and system to Florida-based NextEra for an agreed purchase price of $115.3 million, the highest of five bids received that February, after over a year of study and debate.
Residents had turned out in two townhall meetings opposing the sale, saying they were worried about steep rate hikes as the company sought to recoup the purchase price, while the supervisors said the sale proceeds could be used to pay down debt, lower taxes, tackle infrastructure projects and generate revenue via interest on savings.
Since that sale vote, residents opposing the sale earned a ballot victory last November on a referendum question establishing a government study commission, which has drafted a home rule charter with referendum provisions that proponents say could stop the sale, and that charter will be on the May 16 ballot for township voters to approve or reject.
On March 8 the supervisors announced that NextEra had made a business decision to pull out of the sale and
“I wouldn’t trust any elected official that would sign a contract with that kind of suicide pact in it.” Kofi Osei
transfer the asset purchase agreement to PA American, which was the second-highest bidder the year before.
Three action items approving the change in buyer were announced at that time, and were up for approval Wednesday night, all ultimately approved by the same four-to-one vote after roughly an hour of public comment from the residents who oppose the sale.
Wilson noted that the revised $104 million purchase price in the updated agreement is roughly $11 million less than NextEra’s price agreed to last year, but roughly $11.6 million more than PA American’s initial bid of roughly $92.4 million from last year.
“It’s important to note the removal of the rate freeze (promised by NextEra) has little effect: the initial APA contemplated the first rate increase in 2025; if PA American is approved as the new buyer, the next increase under its ownership is not expected until at least 2025,” he said.
Unlike NextEra, PA American already operates in Pennsylvania, is familiar with the Pennsylvania Utility Commission’s approval processes, and offers hardship grants and discounts to customers in need, he said.
“The reality is, whether the township keeps the system or sells it, sewer rates will likely increase. Contrary to certain misinformation proffered by sale opponents, the sale makes financial sense,” Wilson said.
Savings for homeowner promised
Proceeds from the sale, if and when closed, could be used to “reverse the 2023 tax increase, because that was primarily to fund our capital projects, which would now be funded from the earnings from the reserves that are set up from the sale,” he added. Sale proceeds could also be used to increase the township’s homestead exemption, while paying down the township’s outstanding debt.
“When we looked at the total picture, there is a significant benefit, resulting in savings over ten years that are expected to be more than $2,500 per homeowner,” Wilson said.
“Moreover, ten years from now, without the benefit of the sale, township debt will be approximately $46 million, plus future interest costs in the tens of millions of dollars. With the benefit of the sale, it will be zero. Again, considering the entire picture is key,” he said.
‘Backdoor tax’ in rate hikes
Kofi Osei, chairman of the study commission, countered that he couldn’t find the $10 million penalty cited in the March 8 meeting, “and I wouldn’t trust any elected official that would sign a contract with that kind of suicide pact in it.” He then pointed out that the study commission’s solicitor has said publicly at several recent meetings of that body that the home rule charter could stop the sale, but the township’s solicitor has not said the study commission’s tactics will fail.
“That is a good enough legal opinion for me, and the only public one regarding this matter, as far as I’m concerned,” he said, before referring to the rate hikes under a private owner as a “backdoor tax” on residents, every year, in perpetuity, and urging residents to vote for the home rule charter on May 16.
“Not to be too morbid, but I am one of the few people in this township with a strong opinion on this sewer sale, who could be here in 50 years. I would rather not need a shovel to tell everyone ‘I told you so.’ This sale decision is bad,” he said.
Pauline Braccio said residents will pay higher sewer bills either way, but said she agreed with the sale option because of that big picture: “over ten years, the township will be in a lot of debt. If you sell the sewer system, it won’t be. That makes more sense to me.”
Study commission member Tina Gallagher said she’s been following numerous state bills proposed to change Act 12, the state law allowing such sewer sales, and said under that law “ratepayers also have to pay for a new and substantial cost: the substantially higher purchase price paid by the new private owner,” while that higher price comes with less input. Study commissioner Martin Cohen said he thought the township and country were both built on a “thriving middle class,” then compared the sewer sale to a house purchase.
“Imagine if you paid for your home the same way that we’re going to be paying for this money that’s being given to us from PA American. Somehow, we’d be paying 10 percent of the value of the property, each year, every year, in perpetuity,” he said.
“We, as a township, have to pay $10.4 million, 10 percent of that $104 million, every year. Whatever that can save on taxes, is going to be minute compared to that $10 million a year that we’re going to be paying in extra sewer bills,” Cohen said, adding that his calculations put that number at roughly $9,000 over ten years for just his household.
And study commissioner Jenn Foster said she had little confidence in the board’s spending the sale proceeds before updating the township’s comprehensive plan for the first time since 1989, and called it “a slap in the face to voters and ratepayers” to change the buyer before the home rule charter vote.
“NextEra clearly wants out, and you could walk away with clean hands,” she said, while PA American’s most recent rate hikes approved by PUC were significantly higher than the township’s annual $450 charge: “We will be paying at least $1,200 in no time…it’s a backdoor tax that we will be paying, in perpetuity, as long as we live here.”
James Collins said he often heard opponents of the study commission urge that group to take more time to draft a charter, yet did not hear the same people ask the supervisors to the same with changing the buyer: “There should be every opportunity made to hear what the people have to say.”
Two bank accounts at stake
As for the financial impact? “There are two different bank accounts at play: there’s the township bank account, where we sell the sewer and they get a huge amount of money. And then there’s my bank account, where I don’t get any money, but I wind up paying additional money. At the end of the day, my wallet, my bank account, doesn’t know the difference,” he said.
Joe Silverman questioned why the change in buyer wasn’t listed publicly before the March 8 meeting, and Vanessa Gaynor said she was watching that meeting online and was “shocked” to hear the change in buyer brought up.
“You’re making a very big decision, on our behalf, without even involving us in the conversation. I don’t understand what the rush is to do this, other than to tie your hands,” she said. “The transparency just feels nonexistent in this situation, and we don’t feel heard. I don’t understand why you would do this to the residents, who are already so upset about it.”
Rory Kelley said he attended the two 2022 townhalls and has since seen numerous public discussion meetings about other topics including a township sidewalk study, but no chances outside of public comment to the supervisors for residents to sound off.
“You never took the residents’ input into any of this. There have been lots of other opportunities in this township that you have taken residents’ input,” Kelley said; “You have an opportunity now to change the decision that you made last year.”
Wilson then read several emailed comments, including from Marsha Edwards, who said the board is “now in a position to correct a terrible mistake,” and said as a grandparent she was worried for future residents: “Our water and sewage should be controlled by the residents, and not by a for-profit company who have no interest in what is best for our township. Save face, and back out now.”
Pam Quatraro cited a recent op-ed from supervisor Joyce Snyder, the only vote against the sale last year, who said she didn’t see a need for the large lump sum from the sale instead of long-term borrowing accompanied by a capital plan to spell out the projects it would fund.
“How about taking a loan instead, to underwrite our project needs? It’s no wonder losing $15 million from the sale, doesn’t faze the rest of the board,” she said.
Scott Francik said he would “much rather” pay higher rates to a township-owned sewer authority than to a for-profit firm, and Bob Kurnik said he though the board was ignoring the public “out of some sort of childish stubbornness.”
“The people of the township have spoken loud and clear, and they are against the sale, which will cause them financial hardship,” he said. “You now have the opportunity to stop this madness, and get back to being the people’s representatives, for which you were elected.”
JoAnn Goble said she was among the “few hundred people” who attended the two April 2022 townhalls to oppose the sale, and cited the over 5,400 votes by residents last November to approve the study commission. “You now have a second chance to not sell this township asset.”
After reading the emailed comments, Wilson said the township would answer questions at the board’s next meeting, and would post an updated financial analysis reflecting the new buyer and purchase price on its website: “That’s been all updated for this transaction.”
After conducting other business, the board voted to approve an assignment agreement transferring the sale to PA American, then an update to the asset purchase agreement, and an amendment to the 2022 sale ordinance. All were passed by four-to-one votes, with Snyder casting the only vote against each.