Allentown Mayor Ed Pawlowski hosted the fourth and final public meeting on the city’s proposed Water & Sewer Privatization plan on Thursday night. Pawlowski spent the majority of the meeting reviewing the reasons as to why the city is in need of this proposed plan.
The main focus of this plan is to decrease or eliminate the current Minimum Municipal Obligation of the unfunded pension liability for police and firefighters.
The unfunded actuarial liability hovers above $130 million and is only being 51.5% funded. Pawlowski mentioned that the city is not yet in a deficit but will be within the next year. According to Pawlowski’s documentation presented at the meeting, the city has around $2 million in the General Funding Budget, which is a 77% decline since 2008.
Pawlowski told the audience that within the last four years the city’s mandatory contribution to the Fire and Police Departments has grown to $15 million, which is 20% of the current city budget. He predicted that the MMO would exceed $23 million within the next three years, which would be 28% of the budget.
The mayor went into detail as to why other ideas to solve this financial crisis were not chosen. He mentioned that if the city was to just raise property taxes to pay off the MMO, Allentown would have a 35% increase on their taxes which, according to Pawlowski, is already the highest in the Lehigh Valley. This increase would only pay off the MMO and not the rest of the pension debt issue that Allentown faces.
Pawlowski also brought up that this would not include the school taxes, which are also being raised by 5% every year for the next five years.
He then discussed why renting or leasing the parking garages across the city would not bring in the amount of revenue needed to tackle the problem. “The parking decks are only being used 2% of the time after 5 PM on weekdays, and only 3% anytime on weekends. At most this would bring in around $15 million,” said Pawlowski.
When asked if this type of concession lease has been successful before, Pawlowski mentioned that it has been successful in Europe for decades. Most recently, in the United States, the city of Bayonne, NJ entered into a concession lease similar to the proposed one for Allentown for $150 million. Pawlowski believes that there is a possibility that this lease could bring in enough revenue to completely wipe out the city’s overall debt, as well as solve the unfunded pension liability.
Pawlowski will no longer be holding public meetings on this proposed lease agreement, although he stated he would continue to answer any question online from the public. He plans to take this lease agreement before City Council next month for a vote to move forward. “[City Council] will be voting on the language of the lease as well as the concept,” said Pawlowski.
If the lease agreement is moved forward by City Council, the next step is to begin accepting proposals from pre-qualified bidders on the project. Pawlowski hopes to award the lease agreement by the end of the year.