What A New Cooperation Agreement Could Mean For PWSA And Pittsburgh

Jun 7, 2019

A newly proposed cooperation agreement between the City of Pittsburgh and the Pittsburgh Water and Sewer Authority will be introduced in city council on Tuesday.

After years of operating based on accepted custom and old arrangements, the document lays out how the authority and the city will interact going forward.

"We are moving to a more businesslike arrangement and an auditable arrangement," said Paul Leger, who chairs PWSA’s board of directors. "Every dollar that we pay the city we will know why and we will have a supporting document with it."

PWSA’s board voted in February to negotiate a new agreement to replace the one signed in 1995. Not only did that contract refer to long-dead practices, it didn’t cover the entirety of the relationship between the city and the authority. For instance, it didn’t mention an annual $7.1 million payment PWSA makes to the city; PWSA also didn’t contribute to a city pension plan in which some employees are enrolled.

Things began to change when the Pennsylvania Public Utility Commission began regulating PWSA in 2018.

“We are moving to the same kind of relationship that other utilities have with the city,” said Leger. “And the city is now going to pay in the same that a customer would pay.”

"The authority has been making great strides at becoming more accountable and more customer-friendly to Pittsburgh residents," Mayor Bill Peduto said in a statement, adding that the new agreement will lend staying power to the improvements made by the authority.

Under the plan, the city would be charged as a commercial customer. But neither the authority nor the city knows how much water it actually uses. Water meters must be installed on all city facilities, an expensive and time-consuming process, said Leger. The new cooperation agreement says PWSA and the city would split the cost of that work. PWSA will phase in the city's water bill over the next five years.

“We’re in a transition period,” said Leger. “So we’re not going to slam the city taxpayer with the possibility of like, $15 million in annual [water] payments that would be ripped out of their budget immediately. I have no desire to do that.”

Like a homeowner, the city will be responsible for water service lines and sewer laterals that feed its facilities, as well as the indoor plumbing for those buildings. However, in parks larger than 50 acres, PWSA will be responsible for water service lines and sewer laterals. The city must still maintain its pools, fountains, and water parks.

How the new agreement affects Pennsylvania American Water customers and the state

In 1973, Pittsburgh City Council signed an agreement to subsidize the cost of water in the south hills through the company now called Pennsylvania American Water. PWSA has been paying that cost on behalf of the city, but will now try to end the subsidy as soon as possible. The PUC says one utility can't subsidize another.

Just as PWSA will gradually increase what it bills the city for water, the city will collect a tax on behalf of the state over the same five-year period. Utilities in Pennsylvania don't pay local real estate taxes. Instead, municipalities collect something called the Pennsylvania Public Utility Realty Tax. PWSA will begin paying that tax in 2020.

What's next for the cooperation agreement

The proposed agreement was negotiated by Leger, board member Jim Turner and mayoral chief of staff Dan Gilman. PUC will review the plan, and both Pittsburgh City Council and PWSA’s board of directors must approve it. The current cooperation agreement expires on July 5. 

Leger expects city council will hold a post-agenda and a public hearing on the new agreement before moving the issue to a vote. Councilor Deb Gross, who is also a PWSA board member, was not immediately available for comment.

The proposed new cooperation agreement confirms “that the system will remain under public ownership,” but does not alter the capital lease which says the physical infrastructure currently rented by PWSA from the city can be purchased by the authority in 2025.

“My intention is to ask the board to endorse the same agreement that the mayor did with Our Water [the Our Water, Our Rivers campaign,” said Leger. “Which states an intention to keep this a public entity forever.”

The proposal will be considered by PWSA’s board at either the June or July meeting, said Leger.