Panel Of Experts Warns Against Private Money, Control At PWSA

Sep 27, 2018

In an informational session at Pittsburgh City Council Thursday, three invited panelists answered members’ questions about privatization and public-private partnerships as they pertain to Pittsburgh Water and Sewer Authority.

Councilor Erika Strassburger, who called the meeting, said PWSA is in a time of transition, and that uncertainty is compounded by the unsolicited advances of private companies.

“I wanted to ensure that council members and the public had a full understanding of our possibilities as a city, as well as a true definition of the phrases we’ve heard thrown around,” she said. “What is a public-private partnership [P3]? What are the different forms it can take? What truly is privatization?”

Each of the panelists—Baltimore City Councilor Bill Henry, Mary Grant of public interest group Food and Water Watch, and Donald Cohen of policy institute In the Public Interest—stressed that any involvement of a private company should be carefully considered.

In 2002, the National Research Council defined privatization to mean everything from sale of a system to public-private partnerships in which a company provided services, operation or financing.

“I like to think of the different types of privatization on a scale of how much control you give up,” said Grant, and cited numerous case studies in which ratepayers and taxpayers remain on the hook for the costs of fixing a city’s water system. She advised council to strengthen PWSA.

Governments and quasi-governmental bodies such as authorities can take on debt at lower rates than private companies thanks to municipal bonds.

“So it’s never going to make financial sense to let a private entity borrow that money for us,” said Henry. Baltimore recently amended its charter to ban sale of its water and sewer system, which serves 1.6 million customers. That resolution will go to voters in a ballot measure in November.

Some Pittsburgh officials have characterized PWSA’s debt, roughly $850 million, as an insurmountable obstacle that prevents the authority from borrowing the money needed to fix the system. Both Henry and Cohen, of In the Public Interest, denied that assertion.

“That is categorically false,” said Cohen. “Let’s say you use private capital...it may not show up as debt on your balance sheet as a city, but it is a debt to the citizens of this city. It is debt. They’ve got to pay it back.”

The city and PWSA are still working to amend a governance agreement, as well as address the “2025 option”: the current lease agreement allows PWSA to buy the system it manages for $1 in 2025.

Councilor Corey O’Connor said council is working on rewriting that agreement.

“We need oversight there that we can’t privatize,” he said.

Council members didn’t have many questions for the panelists, but thanked them. Several councilors characterized the discussion as an opening salvo in what they expect to be a long, public discussion about the future of PWSA.