Upper Pottsgrove Votes 4-1 to Sell Sewer System

Image from Screenshot

Those participating in last night's Upper Pottsgrove Commissioners meeting listen to Commissioner Martin Schreiber, outlined in the yellow rectangle, discuss his objections to the sale of the sewer system.

Surprising no one, the Upper Pottsgrove Township Commissioners vote 4-1 Monday night to sell the township's sewer collection system for $13.75 million to Pennsylvania American Water.

Commissioners Martin Schreiber cast the sole vote against the sale.

As The Mercury reported April 8, the presentation provided at four online informational sessions earlier in the month forecast that sewer rates would drop by about 9.6 percent under Pennsylvania American Water ownership.

However, the decrease — from the current $71.87 per month to $65 per month — would be short-lived, according to Bernie Grundusky, senior director for business development for the water company.

A chart he shared as part of the online meetings showed rates would return to the current rate in three or four years after the sale, and then increase annually by an average of 4.5 to 5.2 percent.

By comparison, the township's sewer rates, which have increased in a more haphazard fashion, average out to between 4.6 to 6 percent a year, according to the presentation.

Now that the sale has been approved, the average homeowner will save  $1,260 between the time rates were dropped to when they return to their current level, according to the presentation.

The deal must still be approved by the Pennsylvania Public Utility Commission, a process which could take longer than a year to be finalized.

As a result of the vote, PFM Financial Advisors LLC will be paid more than $250,000.

As noted by Commissioners Chairman Trace Slinkerd, who, prior to the vote, praised the consultants for taking a risk, noting that if the commissioners voted against the sale, PFM would have been paid only its $7,500 fee for preliminary work.

Scott Shearer, managing director of PFM, insisted during Monday's meeting that the firm "did not make a recommendation. We're not trying to sell this system."

During the four public information sessions the township staged online, not one negative aspect of the sale identified. Township Manager Michelle Reddick said the presentations were put together by PFM and the staff.

(You can see that presentation by clicking here.)

During those meetings, Slinkerd restricted all interaction to questions from residents, which were mostly answered by the consultants or township staff. He said public comments would be accepted at the April 20 meeting.

When that happened last night, the online meeting was attended by more than 50 people.

Eight residents spoke. All but one asked the commissioners to vote against the sale or, even more frequently, delay the vote until next month or later.

Pennsylvania American Water's bid does not expire until June 30.

Don Read, a former member of the Pottstown Borough Authority and a current member of the township's sewer committee, spoke in favor of the sale and said, as he did at the April 16 meeting, that the best reason to sell the system is the risk inherent in running it.

He said the potential capital costs of problems with sewer lines and pump stations, as well as capital costs imposed by the Pottstown Borough Authority, which runs the plant that receives and treats Upper Pottsgrove's sewage, is too big a financial risk for a four-person staff.

"The price is on the high side of what we projected," he said of the winning bid. The other bidder was Aqua America. "What's another month going to do? It's frustrating to watch people come in at the last hour and ask for a delay."

He was referring, presumably, to other speakers who said they were unaware of the potential sale of the system until they received a township letter in the mail, a letter which arrived after the first two public information sessions had already occurred. 

"I am imploring you all to take an opportunity to table the vote until the May 20th meeting," said Turnberry Farms resident Stephanie Rowe.

"This is beneficial in several ways, the first being it allows all residents to be able to digest and question this decision that seems to be on a fast track for a reason that has not been satisfied by any of the presentations that you allowed to happen with little or no response from the board -- almost every question was deferred to either PFM or PA American Water," Rowe said.

Darryle Tillman, seen in scrubs framed in yellow, objected
to the manner in which the township has proceeded with the sale.

Darryle Tillman, who appeared in scrubs while caring "for 104 patients, one third to one half of
which have COVID-19," also urged a delay.

"This plan has its good points and its bad points, but it is ridiculous to do this in a Zoom meeting in the middle of a pandemic," he said in reference to the on-line platform used for the meeting.

Al Leach, who is also the vice president of the Pottsgrove School Board, also urged a pause.

"I'm sure you've all done your due diligence, but a lot of residents are just finding out about this and would like to see if they can get more involved," Leach said.

"There are a lot of questions that need to get answered, like how the board intends to spend the proceeds, and the open space question," he said.

Although the presentation has identified the proceeds as paying down the sewer system debt; making the pension system whole and paying off general fund and road fund debt, two other proposed uses have raised questions.

One is paying off debt undertaken by the open space fund, which is paid off with a voter-approved earned income tax; and infrastructure improvements to the police station and township offices in the firehouse.

No specific plan for those improvements has been presented as part of the sewer system sale proposal, said resident Doug Kern.

"We have no access to the paperwork, no ability to examine this ourselves," said Kern, who said he did not find out about the proposal until two of the public information sessions had already passed.

"All I have is a bunch of slides, which changed after almost every meeting, and a lot of 'take-my-word-for-it-answers. It sounds like you have a 90-day window to make a decision," said Kern, urging a delay or a no vote.

Dustin Schreiber said his research indicates American Water, the parent company of the high bidder, "is owned by a German conglomerate called RFWAG. I'd prefer we support an American company if we sell, and  I'm not convinced we should sell."

Hanover Drive resident Keith Plumadore said he sees the sale as a short-term fix for the township's finances. "It's an temporary reprieve from amateur fiscal management. The township did a good job with the (request for proposals) but I see no evidence the township will execute and bring better fiscal governance with the proceeds."

"When I moved here in 2000, the commissioners and the people all worked together," said Leach. "I implore you to at least consider the idea of tabling this motion, It would be so easy to delay this vote so we can get all our ducks in a row and demonstrate transparency we always used to have in this community."

Slinkerd closed public comment and then called on Schreiber to outline the objections he has been posting on his Facebook page and the Turnberry Farms Facebook page.

However, as Schreiber spoke, Slinkerd repeatedly interrupted him, talked over him and told him his points were not relevant to the subject at hand.

"The sewer customers paid for the sewer, if they were stock holders, they should be getting a bonus check, they're getting the short-end of the stick," said Schreiber. 

"What about people who pay school taxes but don't have any children in the system," Slinkerd interjected. "Should they not be taxed?"

"Everyone has a chance to send to send students to school," Schreiber replied. "What about open space, Martin?" Slinkerd interrupted again. "That's paid with earned income tax, but seniors don't pay that. Should we put signs up telling them they can't use the open space?" Slinkerd asked.

"We taxed ourselves for that," Schreiber started to reply and Slinkerd pressed on. "We don't separate our residents into septic or sewer residents. Are you saying that's the way we should go?"

As Schreiber tried to raise further points, Slinkerd continued to interrupt him. "That's what you've been doing, going down this rabbit hole trying to dislodge what we're talking about," Slinkerd said.

"You keep trying to throw things at the wall at the 11th hour to see what sticks to make it seem like you did research," he continued. "You've had a year to think about this stuff."

"Are you going to let me finish?" Schreiber finally asked. "I never stopped you," Slinkerd replied, finally allowing Schreiber to speak uninterrupted.

The areas of Upper Pottsgrove shown in green are
part of the sewer collection system.

The other commissioners, Dave Waldt, Cathy Paretti and Renee Spaide were permitted to speak uninterrupted, except when Schrieber thought Paretti was finished with her point.

He apologized for interrupting her and urged her to go on.

The other commissioners joined in disputing Schreiber's points.

Spaide, who has served on the board for many years with Schreiber, read from a prepared statement that noted, in part, "all the commissioners have been involved."

She said she agrees with Read that running the sewer system is a risk. "We have a road crew, not a sewer crew and Pennsylvania American Water does this for a living," said Spaide.

Waldt said he and Paretti "ran on concern about the township's finances. People were very unhappy." He disputed Schreiber's characterization that he was left out of discussions. "We've spent hours on the budget and I never see you. You never participate," said Waldt.

"Dave and I started to get to get acquainted with this while we were running," said Paretti. "We don't have any business running a sewer business. If we keep it, our taxes would rise and the rates would be higher than if we didn't own it."

She added, "I don't wait to be invited into things, I ask for the information I need."

When Schreiber tried to point out he had asked Reddick for information and it took two days to get an answer, the other commissioners leapt to her defense. "Michelle has a lot on her plate," said Paretti.

"Michelle has done an outstanding job," said Slinkerd.

Paretti pointed out that while people last night were complaining about having the meeting over Zoom, it had more participants than most in-person township meetings. 

"It's great to see so many people participate. This is not as many as we get at regular meetings. I've had people tell me they like this better," said Paretti. "You're never going to make everyone happy." 

But even in a pandemic, "the one thing that can't stop is your government," Paretti said.

After the vote, Slinkerd said next steps would be discussed at a future meeting.

U. Pottsgrove Sewer Sale Hinges on Monday Vote

The green-shaded area indicates the Upper Pottsgrove parcels served by the township's sewer collection system.

After more than a year of discussion, and four online question and answer sessions, the drive to sell the township's sewer collection system comes down to a single vote Monday night.

Although the sale, if approved Monday by the commissioners, must still be approved by the Public Utility Commission, the township's final say on the matter will be Monday's vote.

On March 20, Pennsylvania American Water, which provides services to 19 percent of Pennsylvania's population, submitted the highest bid for the purchase of the system — $13,750,000.

Ben Kapenstein, who works for PFM Financial Advisors LLC, said bid is "on the high end" of what the township was anticipating being offered. The other company to offer a bid was Aqua PA.

Informational Meetings

Prior to Monday's pending voting, the commissioners staged four online question and answer sessions on April 6, April 8, April 14 and April 16. Participation ranged from 40 to as many as 70 people at each one.

Each session included an hour-long presentation on how the township got to this point, and the benefits of the sale of the system which serves about 1,600 households. By way of comparison, Pennsylvania American has 74,000 wastewater customers among the various systems it owns.

The company most recently purchased the Exeter Township wastewater system for $93.5 million and is in the process of purchasing Royersford Borough's system.



As The Mercury reported April 8, the presentation forecasts that sewer rates would drop by about 9.6 percent if the township commissioners vote to sell the system to Pennsylvania American Water.

However, the decrease — from the current $71.87 per month to $65 per month — would be short-lived, according to Bernie Grundusky, senior director for business development for the water company.

A chart he shared as part of the online meeting showed rates would return to the current rate in three

This slide from the presentation shows the difference in sewer rates.

or four years after the sale, and then increase annually by an average of 4.5 to 5.2 percent.

By comparison, the township's sewer rates, which have increased in a more haphazard fashion, average out to between 4.6 to 6 percent a year, according to the presentation.

If the sale goes through, the average homeowner would have saved $1,260 between the time rates were dropped to when they return to their current level, according to the presentation.

In addition to the lowered rates, the benefits touted in the presentation included:

• The retirement of all township debt, including unfunded pension obligations;
• A transfer of the inherent risk of running the system to a third, expert, party;
• The ability to spend up to $4 million on infrastructure projects like a new or upgraded police station without borrowing;
• The elimination of the $5,447 "tap-in fee," currently charged by the township for new connections to the system.

Why the Rush?

Many of the residents who participated had questions — ranging from how the sale would affect their property and proposed sewer expansion projects and what some perceived as a "rush" to vote on the matter.

"Why does the vote need to happen on April 20?" resident Stephanie Rowe asked during the final meeting Thursday.

"We're in the middle of a pandemic. We're doing meetings on line and we're all dealing with a new normal," she said.

"I think we can do this," Commissioners Chairman Trace Slinkerd replied. "We've done enough due diligence. We need to get this moving through the PUC process," he said in reference to the sale still needing to be approved by the Pennsylvania Public Utility Commission process.

"I live on a cul de sac and there are six families there, three of them have first responders who could not be at this meeting and the other three had no idea this was happening," Rowe said.

"We still have nine to 12 months of more exploration until everything is closed," said Commissioner Cathy Paretti in apparent reference to the PUC approval timeline.

"We'll still be looking at information," Paretti said. "It's not like the vote Monday is the end of it."

But it is the end of it as far as decisions by the commissioners are concerned argued Commissioner Martin Schreiber, who has repeatedly expressed frustration at the idea of holding the public meetings online and what he has described as his difficulty getting answers.

He said after two queries, he still had not been told when the bids expire and it will be too late for the township to act. "We have 22 staff people, I don't understand why I can't get answers," he fumed.

The answer was then supplied by Township Solicitor Charles D. Garner Jr., who said the Pennsylvania American bid expires on June 30.

Who Pays? Who Benefits?

Other pointed questions revolved around the fact that not all residents have paid into the system system, but all residents will benefit.

According to the presentation, Upper Pottsgrove has about $8.4 million in debt, but only $4.7 million is sewer debt, which would be paid out of the proceeds of the sale of the system.

The remaining debt is $2.1 million in the open space fund; about $208,000 in the general fund and $241,000 in the road fund.

Elwood Taylor, highlighted at the top right, had

a long list of questions during the online meeting.

About 65 percent of the township's parcels are served by the system so the sale of the asset sewer customers have paid to build and maintain will benefit those who have never paid into the system, argued former commissioner Elwood Taylor.

"Much of this would make sense if the $8 million in debt where all general fund debt, but you're putting the burden of paying off township-wide debt on sewer users," Taylor said.

He also pointed out that using the proceeds from the sewer sale to pay off the debt in the township open space fund will not result in savings to the general fund.

The open space fund debt is paid through an additional earned income tax approved by voters in 2006. The money raised by that tax can only be spent to purchase new open space, or maintain the township's current open space, Garner confirmed.

Taylor also argued that when residents have an issue with their sewer bill, or how the system is run, they can take those complaints to their elected officials and even work toward throwing them out of office if they don't like the results.

After selling to Pennsylvania American, Upper Pottsgrove customers would have the same standing as the other 74,000 customers in the state and, if they don't get satisfaction from the company in a dispute, would only be able to take it to the Public Utility Commission, Taylor said.

Avoiding Risk

Others supported the sale.

Don Read, who served on the Pottstown Borough Authority and is currently on the township's sewer committee, said "it looks like it makes sense to sell it."

Read said he sees the primary benefit of the sale as "mitigating risk."

A screenshot from the April 16 informational meeting.

He explained that in addition to capital costs Upper Pottsgrove's collection system may incur, it is also responsible for its portion of capital projects at the wastewater treatment plant on Industrial Highway in Pottstown, which receives and treats Upper Pottsgrove's waste.

That plant is operated by the Pottstown Borough Authority and the township has no say in what gets done at that plant, or how much it costs, said Read.

Last year the authority completed a $5 million sludge dryer replacement project which Upper Pottsgrove, and the other surrounding townships who send sewage to the plant, helped to fund under the terms of the agreement with the borough authority.

"The borough authority can throw anything at us they want," said Read.

In fact, that agreement is something Pennsylvania America will have to resolve if the commissioners vote Monday to sell them the system. The authority can agree to transfer the existing agreement to the new owners, or require a new one, according to Township Manager Michelle Reddick.

But Marc Feller, an attorney with the firm Philadelphia law firm of Dilworth Paxson — hired by the township as special counsel to the sewer sale — pointed out that "the Pottstown plant needs the waste as much as the township needs a place to dispose of it."

Conflict of Interest?

In addition to the law firm, Upper Pottsgrove hired PFM Financial Advisors LLC, also known as Public Finance Management, to assess the feasibility of selling the system. It is the same firm that handled the sale of the Royersford sewer system to Pennsylvania American Water for $13 million.

According to an answer Reddick posted on the township website, PFM will be paid a fee of $7,500 for the "limited scope valuation" it undertook to explore the question of whether selling the system would be beneficial.

A second agreement for the work it has done since then, which Slinkerd previously described as being $50,000 plus 1.5 percent of sale price, indicates that PFM will be paid the major portion of their fee only if the commissioners agree to the sale.

As a result, PFM will receive about $250,750 if the township agrees to sell, and only $7,500 if the commissioners vote against the sale, which raises the question of whether PFM is motivated to convince the commissioners to sell in considering the information it presents to them.

In her posted response, Reddick did address the part of the question which read "Any conflict of interest concerns the taxpayers should be aware of?"

No downsides to selling the system were identified in any part of the presentation, which was prepared by PFM and which became more detailed over the course of the four online meetings as questions from residents provoked fine tuning.

A Mercury email to Reddick asking if any negatives to selling the system had been identified in the year-long exploration of the issues, had elicited no reply as of Friday evening.

Thursday night, Slinkerd, who restricted public involvement in the four meetings to questions from residents, thus prohibiting a Mercury reporter from being be called upon to ask questions, said the commissioners will entertain opinions and comments on the proposed sale during Monday's meeting.

Those comments will be limited to three minutes.

"Commissioners will then debate this and hash it all out," said Slinkerd.

To date, Schreiber, who has been on the board for several years, has been the only commissioner to ask questions publicly about the proposed sale.

Two other commissioners, Paretti and Dave Waldt took office four months ago, although they were in regular attendance at commissioner meetings prior to that.

Renee Spaide is the fifth township commissioner who has a vote Monday.