A Step To Overhaul PWSA Is On The Table, Here’s Why It’s Stalled In Council

Apr 23, 2018

For a while it seemed as though every day brought some fresh disaster for the Pittsburgh Water and Sewer Authority: billing errors, elevated lead levels, boil water advisories

There were calls for state oversight and both the state auditor general and Allegheny County controller issued urgent reports on PWSA’s failing health.

Last month, Mayor Bill Peduto introduced legislation to city council that would remove elected officials’ power to appoint PWSA leadership. The proposal came nearly a year after Peduto appointed a PWSA review panel with dire warnings about the fate of the city’s water. Supporters of the change say it will prevent PWSA from repeating its checkered past, but city council members worry it diminishes government oversight of the water supply just years before a one-sentence clause written in 1995 could allow the system to be sold entirely.

“That is basically privatization,” said Councilwoman Deb Gross. “We really need to have that conversation with our constituents.”

On March 28, city council members voted unanimously to hold the measure for six weeks.

A Brief Retelling Of PWSA’s Origin Story

The city’s current relationship with the Pittsburgh Water and Sewer Authority began in 1995, in  a deal intended to pull the city back from the brink of bankruptcy, said Mayor Bill Peduto.

Under Mayor Tom Murphy, PWSA pumped money into city coffers by paying $96 million over the next three years to lease Pittsburgh’s water and sewer systems.

“[The city] got all the money up front and none of it went back to investing into the system,” said Peduto. “[PWSA] was never created to provide water for people. It was only created to fix a hole in the budget.”

PWSA became a sort of political plaything, said Peduto -- the elected officials running the authority never raised rates because it looked bad, so the infrastructure wasn’t cared for.

“We’re left with a system that is a result of 20 years of disinvestment, disinterest, of political decision-making," he said. "Of having politicians make decisions instead of engineers.”

The Proposal

Currently, PWSA is governed by a seven-member board of directors. Those members are appointed by the mayor and approved by city council. A member of city council also sits and votes on the board, a role currently filled by Gross.

It’s not possible to serve the city’s interests and the interests of PWSA customers at the same time, said Alex Thomson, a former PWSA board chair who helped write the new proposal. He cited the city’s water subsidy as an example.

Right now, PWSA must annually give away millions of gallons of free water to city agencies, as well as places such as the Pittsburgh Zoo, Phipps Conservatory and the National Aviary. Last year, the mayoral panel recommended that PWSA bill the city like everyone else.

“On one side, [city employees on the board] may not want to make that change because it has a negative impact on the city. But on the other side it has a positive impact to the Pittsburgh Water and Sewer Authority and they should make that change,” Thomson said. “That’s the conflicting loyalties we’re trying to eliminate, by creating a board that isn’t made up of people that have two roles.”

The legislation before City Council would create a new, five-person oversight body called the board of nominators. That board would select a nine-member board of directors and evaluate them every year through “an open and transparent process.” Exactly how is still yet to be determined: like many new institutions, one of the board of nominators’ first tasks would be to write and adopt selection and accountability procedures.

The mayor would select the very first board of nominators from candidates suggested by the mayoral panel; council would have to approve the initial slate. But all subsequent boards would be selected by the sitting board of nominators.

While city council could remove a member of the board of nominators with seven out of nine votes and the approval of the mayor, it can not remove a member of the board of directors. However, the body has a check on the front end: council's approval is still required to become a member of the board of directors. Finally, council would lose its voting seat on the board of directors and instead have an ex-officio role.

Council members say they’re concerned the changes could make the authority less accountable to the more than 300,000 customers it serves throughout Pittsburgh and nearby areas.

Councilman Corey O’Connor thinks both the board of nominators and board of directors should require council approval.

“Going through our process is not that difficult,” he said. “If you put board members on there that have no responsibility to the general public, what’s to say that they’re going to have [people’s] individuals’ best interests at heart?”

A Looming Deadline

Those concerns are compounded by a single paragraph in the nearly 30-year-old capital lease agreement that created the modern PWSA in 1995.

When PWSA agreed to pay almost $100 million in rent for its network of water and sewer pipes and all the rest of its infrastructure, the water authority also won a provision stating that they had the right to buy the whole system in 2025 for $1.

The capital lease agreement isn’t part of the governance contract in front of council, but it’s something the members really need to discuss, said O’Connor, who chairs the Committee on Intergovernmental Affairs.

“You know, everybody says, ‘Oh, it’s down the road, it’s down the road,’” he said. “That’s going to be here before you know it.”

Gross worries the change in governance coupled with the 2025 deadline could be a route to sell PWSA to a private company.

“This is on city council’s plate. City council owns the water system,” she said. “To sell a city asset, to even remove and change control of a city asset, is the job of your elected officials.”

Thomson said he can’t stress enough that he and his colleagues believe PWSA should remain a public asset. Even if PWSA were to buy the infrastructure assets, it would not make the authority a private entity: it would still be accountable to the public through the Pennsylvania Public Utility Commission, and a board of directors that has to meet muster with city council.

Thomson fears that if city council doesn’t change PWSA’s governance, the status quo could result in exactly the sale that Gross fears.

“[PWSA] can only remain a public asset if it is effectively run. Otherwise, we have a failed system, and we’ve got to look at all the possible options to make sure the community gets safe, reliable water,” he said. “If we don’t fix how it’s run it’s inevitably going to more likely lead to privatization.”

It’s already happened once before. When PWSA didn’t have the resources to fix the system, it hired a private company, Veolia, to do so. Veolia had the deep pockets that PWSA and Pittsburgh lacked. But during Veolia’s tenure, the chemical control plan was altered in a way that accelerated rising lead levels in the city’s water supply.

Peduto and the mayoral panel see politics as the root cause of PWSA’s problems; politics allowed Veolia to happen.

But Gross said politics saved PWSA: without council’s seat on the board, she’s not sure they would have been able to sound the alarm—the deluge of constituent calls raised awareness about Veolia.

“The private market influence proved itself not to be the solution," Gross said. "Why remove control of the system from city council? [That’s] still an open question I haven’t heard a good answer to.”

When asked what he thought of council wanting to study the governance issue further, Thomson said it’s time to act.

“If they haven't been studying it over the past year despite the fact that they've been pounding the table?” he said. “Shame on them.”

A public hearing on the proposed governance changes has not yet been scheduled.

This post was updated at 8:34 on April 25, 2018 to clarify City Council's proposed relationship to PWSA's board of directors.