Mayoral Panel Recommends Reorganizing PWSA, Rejects Privatization For Now

Dec 28, 2017

After months of consultant presentations, public meetings, reports and data evaluation, the mayoral panel selected to judge how to restructure the Pittsburgh Water and Sewer Authority released its report Thursday.

Instead of dissolving PWSA in favor of a public trust to manage water and sewer operations while leasing infrastructure to a private entity—as championed by consultant Infrastructure Management Group, Inc.—the panel recommended the authority be reorganized and insulated from political winds.

“We really think this is the best choice,” said Michelle Naccarati-Chapkis, a member of the mayoral panel and executive director of the nonprofit Women For A Healthy Environment. “That it’s independent of elected politics and ensures public accountability, trust and transparency in the system.”

While creating a public trust would have achieved political independence, said Naccarati-Chapkis, the panel judged the same results could be realized more quickly through different means.

The panel writes that creating a separate organization or agreement to address infrastructure would be "risky" at this point, but leaves the door open to reconsider IMG's proposal after governance changes are instituted. 

To restrict the influence of the mayor and city council on PWSA, the panel recommends the creation of an independent board of nominators. That board would then select a new board of directors for the authority. The directors themselves would still be responsible for ensuring the authority protects public health and safety, maintains its finances, and is efficient and productive.

The panel's recommendations first need to be adopted by the mayor, City Council and PWSA's existing board of directors. 

“We know there’s been some loss of trust from the public,” said Naccarati-Chapkis. “Moving forward, we anticipate and hope that the mayor and his team as well as City Council and the PWSA board of directors embraces this report and then we work collectively to work through the next steps in terms of implementation.”

The report calls PWSA’s weaknesses “a crisis we must not waste” as well as an opportunity to make long-delayed investments in the water and sewer systems and overhaul how the authority is governed. The panel acknowledged PWSA has made “significant progress” in addressing its challenges and charting a new path. When asked if the panel’s recommendation amounts to an endorsement of PWSA’s present course of action, Naccarati-Chapkis said yes, but that those changes need to be made more durable. The report characterizes the authority’s improvements as “fragile.”

Naccarati-Chapkis said the panel hopes a board of nominators could be in place by March 31, 2018, but adds a new governance contract is sufficient only in the short term. Eventually, changes to PWSA would need to be codified at the state level in its enabling legislation, the Municipal Authorities Act.

Beyond reorganizing PWSA’s governance structure, the mayoral panel recommended several discrete actions to immediately improve the authority’s finances and operations: to eliminate the residency requirement for PWSA employees in order to widen the talent pool for hiring; to eliminate the subsidy for Penn American Water Company customers in PWSA’s service area; to require ALCOSAN to conduct its own billing and collection; to create a stormwater fee; and to stop supplying water for free to the city and places such as the Pittsburgh Zoo and PPG Aquarium, Phipps Conservatory and others.

When the process of evaluating PWSA kicked off in March 2017, the authority’s debt was a major concern: Mayor Bill Peduto pegged the needed capital investment at some $4 billion. With more than $750 million in existing debt, borrowing more money or raising rates sufficiently to generate that level of capital was deemed unlikely.

In the last few weeks, PWSA managed to restructure $380 million of its debt, producing significant savings. The panel wrote, “These developments are a reason for optimism about the future as the PWSA codifies and seeks to implement its broader capital plan.”

In a statement, PWSA’s Interim Executive Director Bob Weimar thanked the mayoral panel for their engagement.

“We are currently reviewing the recommendations included in their report, and look forward to working with all of our stakeholders to determine the best path forward for the organization.”

The panel has provided a public service, said Peduto in a statement. 

"Nothing is more important than protecting our water and ensuring that residents are provided this precious resource safely and efficiently." 

The panel’s recommendations have been presented to the mayor and City Council. A public meeting to discuss the report is expected in January.