Not all of the $211.3 million Allentown has received from Lehigh County Authority will be spent to end the city’s pension debt crisis.
During a City Council committee-of-the-whole meeting Thursday night, city officials outlined how they plan to spend the money from Allentown’s 50-year lease of the water and sewer system to LCA.
They revealed more than $31 million already has been spent, none of it to reduce police and firefighter pension costs.
Here’s the breakdown:
• $170 million will be used to reduce and possibly eliminate the
unfunded liability in those pension funds and to reduce pension obligation bonds
• $29.3 million immediately was used to pay off the city’s outstanding
water and sewer debts, as well to pay other related costs
• $8.5 million will be used to build up cash reserves in the city’s
unrestricted general fund
• $2 million already has been used to complete the city’s automatic
meter reading project
• $1.5 million will go into a sewer “administrative order” reserve
fund, that will be used to address sewage overflows and water infiltration and inflow into the city’s sanitary sewer system
LCA took over the operation of the city’s water and sanitary sewerage systems on Aug. 8, the day after the lease deal was concluded.
Before that lease was approved, Mayor Ed Pawlowski repeatedly argued the water and sewer systems had to be leased because the city was facing an unfunded debt approaching $160 million in its police and firefighter pensions.
The mayor warned the city faced crippling tax increases and cuts in services if the lease deal failed and that debt was not eliminated.
City Council member Peter Schweyer explained the city is able to designate that some of the lease revenue be used for more than ending that pension crisis because it got more money from the lease than originally anticipated.
But the administration has not yet decided how much of the pension debt it actually will eliminate. The mayor said the city may decide to continue with “a small amount of unfunded pension liability” but stressed that decision has not yet been made.
“We’re out from underneath this pension nightmare that we had,”
declared the mayor. “We’ve put ourselves back on a solid fiscal footing.
“Everybody in the state and everybody in the country is looking at us as an example of how you can address this huge monster of a pension cost, without having to bankrupt the city in the process.”
Pawlowski and other members of his administration, as well as Scott Shearer of PFM, the city’s financial consultant, were at the meeting to answer questions about the status of the water and sewer lease.
More details about the outlined spending allocations will be contained in the administration’s proposed budget for 2014, which City Council must review and approve before the end of this year.
City Council member Jeanette Eichenwald repeatedly asked the mayor and Shearer if the city’s pensions now are fully funded. She said she’s heard “over and over again” that the city now has a fully funded pension.
“When we pay off our unfunded pension liability, we will have a fully funded pension,” responded Pawlowski.
Resident Rich Fegley angrily accused Pawlowski of boasting that the city now has a fully-funded pension plan, as part of his campaign to become Pennsylvania’s next governor. Pawlowski is running both for re-election as mayor and in next spring’s Democratic primary for governor.
“Mr. Fegley is correct,” confirmed Eichenwald. “There’s a big difference between saying that ‘it will be’ and that ‘it is’.”
“We have the money in the bank,” said the mayor, who argued the city now is just “doing the process to transfer the money to pay off the unfunded pension liability.” He added that process will be completed before the end of this year.
Fegley was one of several critics of the administration who got into arguments with the mayor at the meeting. Resident Lou Hershman accused Pawlowski of making snide remarks.
Michael Donovan, who is running as an independent against Pawlowski in the Nov. 5 mayoral election in Allentown, was at the meeting and asked his opponent questions about the lease, but their exchanges were polite.