Monday, May 12, 2008
Drowning in Debt?
Reacting to the Pittsburgh Water and Sewer Authority’s $13.1 million payment in lieu of taxes to the City, the Controller queried “Is this an attempt to transfer the costs of city government from taxpayers on to ratepayers?”
Talk about how things go in cycles. The Authority was basically devised to transfer the costs from the City to the ratepayers. Consider that in 1995 the City entered into a long-term lease with the authority formally called a Cooperation Agreement and System Lease. As part of the agreement, the City transferred all Water Department employees, along with their workers’ comp and compensated absences, to the Authority. The City did, however, retain the employees in its municipal pension plan. The system lease agreement mandated minimum lease payments, plus interest, and the Authority can buy the water system in 2025 for $1. That was all executed to give the City upfront cash and make the employment numbers for the City look smaller by getting those employees off of the City’s books and onto the Authority’s.
Now we have an authority that just had its existence extended to 2045 and its additional debt, while not considered by the Controller’s audit as City debt, adds to what is termed “overlapping debt” that affects City residents, totaling $1.6 billion before the new bond issue.
The Controller’s audit shows that the Authority’s operating expenses have increased 65 percent since 1997 while gross revenues have gone up 62 percent. Those expenses are likely to go up due to the Federal government’s decree on improving water and sewer infrastructure. That means more pressure on ratepayers, who, along with their City tax load, become even more burdened.
Talk about how things go in cycles. The Authority was basically devised to transfer the costs from the City to the ratepayers. Consider that in 1995 the City entered into a long-term lease with the authority formally called a Cooperation Agreement and System Lease. As part of the agreement, the City transferred all Water Department employees, along with their workers’ comp and compensated absences, to the Authority. The City did, however, retain the employees in its municipal pension plan. The system lease agreement mandated minimum lease payments, plus interest, and the Authority can buy the water system in 2025 for $1. That was all executed to give the City upfront cash and make the employment numbers for the City look smaller by getting those employees off of the City’s books and onto the Authority’s.
Now we have an authority that just had its existence extended to 2045 and its additional debt, while not considered by the Controller’s audit as City debt, adds to what is termed “overlapping debt” that affects City residents, totaling $1.6 billion before the new bond issue.
The Controller’s audit shows that the Authority’s operating expenses have increased 65 percent since 1997 while gross revenues have gone up 62 percent. Those expenses are likely to go up due to the Federal government’s decree on improving water and sewer infrastructure. That means more pressure on ratepayers, who, along with their City tax load, become even more burdened.
