A good deal or something that could drown future city finances make up the debate over Allentown leasing its water system to the Lehigh County Authority. Thursday was the first day of the 50-year lease.
It's a deal that was supposed to net the city an upfront payment of $220 million, but because of higher than expected bond rates, the city is getting $211 million, which is just one example of the controversy swimming around the deal.
Jim Powers, a resident of the city for 40 years and an opponent of the water lease, called his yearly water bill, at least for now, one of the best deals on the planet.
"We pay $220 per year. That is 63 cents per day," said Powers, who may soon be in for a surprise when the rates eventually rise.
"One of the advantages is we are non-profit organization," said Aurel Arndt, executive director of the Lehigh County Authority, when asked what he can tell customers about their bills during the life of the lease.
For the first three years, rates for Allentown customers will remain flat. Then, a 2.5 percent yearly increase, plus the consumer price index, will occur for the next 17 years. The remaining three decades will see a 2 percent yearly increase plus the CPI.
But it all comes with a "but," Arndt said.
"At this point, there are no guarantees. Many things can change on an ongoing basis," Arndt said. However, Arndt does not expect huge rate increases to occur.
From the start, Allentown Mayor Ed Pawlowski said the deal would save the city from drowning in rapid-rate increases in pension costs, but Councilwoman Jeanette Eichenwald, the only councilperson to vote against the deal said, over the long run, the loss of the water system, which netted the city $11 million per year, will do more to sink the city than keep it afloat.
"Right away, opening day, the city of Allentown is short for operating expenses $4.5 million. Times that by 50 years," Eichenwald said.
Mayor Pawlowski says this annual $4.5 million wasn't lost but in part was given to the city upfront instead. He says the city wanted more money upfront to pay off water system debt and pay off the unfunded pension liability. He adds the $11 million Eichenwald is worried about is a non-issue. He says that money, earned each year by the water system, could only be used as part of the water sewer budget and not in the general fund. As the city no longer needs to fund the water system that loss of money doesn't hurt the city budget.
As for Powers, who is part of a water consumer protection group, the biggest loss may not be money but control of what many consider the most precious resource.
Allentown did say some city costs will be reduced by the LCA hiring more than 80 city employees. However, the city did create a 24-person storm sewer management team, which Eichenwald said will cost the city more than $2 million per year.
Pawlowski counters that the amount is more like $1.5 million and is minor compared to the $20 million that would have been spent on the unfunded pension liability.