Pawlowski is convinced the best way to save the city is by leasing its water and sewer systems for an estimated $200 million.
“We’re trying to address this before it becomes a crisis, but the crisis is on the horizon,” said the mayor. “It is inevitable we will go off the precipice if we don’t do something soon.
“Between the pension costs and the downturn in revenue, we’ve eaten away all our savings. We’re down to $1.9 million.” He said that money will be gone by 2014.
If the controversial lease deal doesn’t happen, the mayor said the city will face massive increases in both water rates and taxes.
He has warned taxes could increase 100 percent if the deal fails.
Allentown already has the highest property tax rate in the entire Lehigh Valley. And Pawlowski knows many people can’t afford to pay more in a city where 25 percent of the residents live at or below the poverty rate and another 20 percent are senior citizens on fixed incomes.
“If the city does not choose this path, our financial situation will worsen deeply,” predicted the mayor. “If we don’t do this, water rates will continue to rise, and so will property taxes, and they will rise dramatically.”
But if the lease is approved, said Pawlowski, revenue from it will eliminate the city’s unfunded pension liability and “dramatically” reduce and stabilize the MMO for the next 30 years. More important for city residents, no increase in city property taxes may be needed for the next six years.
Yet signs declaring “Stop the Corporate Water Grab” are beginning to pop up in yards in the city and one group of residents hopes to stop the lease by having Allentown voters decide the issue in a May referendum. They feel Allentown’s water is much too precious a resource to be controlled by a private company for the next half century.
On Oct. 17, the mayor called a news conference to assure residents and businesses that his lease plan will protect them from skyrocketing water rates for the next 50 years.
He promised water rates will remain unchanged through 2015. From 2016 to 2032, they would rise 2.5 percent plus the Consumer Price Index. Beginning in 2032, they would rise 1.5 percent plus the CPI.
Pawlowski said in the last 20 years water and sewer rates in Allentown increased 196 percent -- an average increase of 5.6 percent a year.
The mayor said even if the annual CPI increases by 2.5 percent, the city’s 33,000 water customers will pay less under the lease than they have been paying in the past.
If Pawlowski hoped that announcement would pull the plug on the controversy surrounding the lease, he was wrong.
By the end of the 50-year deal, the typical household’s annual water and sewer bill will increase by 1,266 percent, claims the Washington, D.C., based Food & Water Watch, which did its own analysis of the proposed lease.
That means a household now paying $457 a year will be paying $6,234 by 2062.
That analysis concluded typical annual household bills will double within the first 10 years and triple by 20th year of the lease. It also warns local businesses will experience even greater increases, which could put a serious financial burden on them.
Mike Moore, Allentown’s communications coordinator, said the increases over the next 50 years will total 579 percent – not 1,266 percent –which is less than the 661 percent in water rate increases city water users have experienced over the last 48 years.
Opponents maintain whatever company the city selects to operate the systems will tack additional fees onto bills, making them much higher than the mayor projected.
The lease allows the system operator to recoup costs for repairs and improvements to the city's water and sewer infrastructure through a capital cost recovery charge.
Opponents say the mayor's projections don't include that charge.
The mayor wasn’t lying about the caps on water rates, said Sam Bernhardt, Pennsylvania organizer for Food & Water Watch. He said there is “not an inch of disparity” between the rates Pawlowski outlined and calculations done by his non-profit consumer organization.
But Bernhardt said the mayor is not factoring in the capital cost recovery charge, which is part of the proposed agreement.
Moore said that's because, “according to the draft agreement, these types of capital expenses will be calculated and billed separately.” He said that Food & Water Watch's estimates are exaggerated by $150 million in potential mandatory improvements.
Moore said improvements will have to be made to the water and sewer systems during the next 50 years whether or not those systems are leased. Without the lease, the city will have to shoulder the cost of those improvements.