Bucks County ratepayers question how they will benefit from $1.1B sale of sewer system

It's complicated, and the proposed sale of the Bucks County Water and Sewer Authority's sewer system to Aqua Pennsylvania for $1.1 billion had ratepayers asking plenty of questions and voicing concerns about its impact at two public hearings Tuesday.

Some held signs in protest but most of the 50 people who came to the morning session at the Bucks County Community College Upper Bucks Campus in Perkasie wanted more information.

As one man said, there is "a lot of skepticism" about the deal since Aqua Pennsylvania is a private company that provides water and/or sewer service to 32 counties in the state and is part of the publicly traded Essential Utilities, based in Bryn Mawr. It must answer to its stockholders as well as its ratepayers.

The evening at BCCC's main campus in Newtown Township was more confrontational with about 80 people showing up for the discussions while members of the groups Neighbors Opposing Privatization Efforts (NOPE) and Food & Water Action joined forces to sign up protestors in a lobby near the conference room. At both sessions, Aqua employees wearing name tags milled the room to talk to people individually about the proposed sewer offer.

"It's an Aqua love fest going on here. It's not a public hearing," said Catherine Miller of Oxford, Chester County, who was helping to organize the protest. Another woman compared the format to "a cocktail party."

Inside the sale:We read the 58-page Bucks County sewer sale agreement so you don't have to. What it says

While the BCWSA had a board meeting Wednesday with a discussion of the proposal sale on the agenda, board Chairman John Cordisco said emphatically beforehand that there would not be a vote on the sale at that meeting, held at The Warrington, 1360 Almshouse Road in Warrington. The meeting was moved from the BCWSA headquarters to accommodate more people.

"There is no chance of a sale unless there is a 10-year rate stabilization," as part of the deal, Cordisco said. BCWSA customers currently pay about $50 monthly for sewer service. In a chart showing what the rates would be from 2024 to to 2034, the authority would charge about $10 more or $60, and Aqua's rate would be about $80. But that would include replacing leaking sewer laterals ― the pipes to individual homes or businesses ― that need replacement because they are contaminating groundwater and streams.

While Cordisco attended and spoke about the proposal at both Tuesday meetings, he left the second one early. Aqua CEO Christopher Franklin who attended the Tuesday morning session and, like Cordisco, chatted with many residents, was not at the evening session, but both men attended the Wednesday morning meeting. Ben Jones, CEO of the water and sewer authority, spent much of Tuesday night answering questions about why the well-regarded authority would want to sell its sewer system.

On Wednesday, about 20 people came out to the meeting and those who spoke were against the sale. Cordisco said that the BCWSA board would take all the comments under advisement and plan to hold more meetings in the fall when more residents are back from vacations.

Franklin, who lived in Bucks County as a child, said, "We always encourage public input. We think this is a healthy process to have customers and the community provide their thoughts on the proposal. Ultimately, the benefits outweigh any perceived downside."

The authority has over $250 million in upcoming expenditures in the years ahead, Jones said, including the purchase of the Bristol Borough Water and Sewer Authority for $50 million and replacing aging sewer mains. And that doesn't include all the requirements that the authority will need to make to meet the terms of a consent agreement with the Environmental Protection Agency, including the installation of cameras in all its sewer lines.

A big part of the discussion at both Tuesday sessions centered on the aging laterals. In Plumstead Township, about 75% of them need to be replaced and throughout the BCWSA system, about 25% do.

Jones said a civil suit settlement in 2019 with the Pennsylvania Heating and Cooling Association denied the authority, as a public nonprofit, access to work on privately owned land to fix or replace the laterals.

The residents or business owners must foot the approximately $8,500 cost to hire a private contractor. Some have insurance to cover when there is a blockage in a pipe, but Jones and Cordisco said that in neighborhoods where many old pipes are leaking and need to be replaced, the state would allow a private company like Aqua to do the job.

Pennsylvania Act 120 of 2018 permits privately owned utilities like Aqua to include replacing laterals or lead-based pipes as one of their utility costs.

Deborah Watkins, director of environmental compliance for Aqua, said the state legislature is now working on more regulations related to this act, which allows Aqua to distribute this cost to sewer ratepayers across the state. Jones estimated the price tag for this work in the BCWSA territory at about $165 million ― a cost borne by individual customers if Aqua does not acquire the BCWSA system. This would be on top of the $250 million needed for other aging equipment, pipes and the Bristol system purchase. Ironically, Jones pointed out, if Aqua can buy the BCWSA, its current employees would most likely be doing the needed work.

Aqua had about eight tables set up at the Tuesday sessions where its employees explained various aspects of the proposal to the ratepayers.

When Aqua made its offer official two weeks ago, the BCWSA board voted 3-1 with Cordisco absent to give the company an exclusivity agreement for a year. This means that during that year, the authority could not sell it to another private company but if the year expires and the sale is not finalized, the authority could pursue other offers.

More:Aqua PA offers $1.1B for Bucks County authority sewer system

Most of the sale proceeds — which could amount to almost $1 billion after the BCWSA pays off its $1.65 million in debt —would go to Bucks County.

Brian Maguire of Warrington asked if the BCWSA would hold back some of the money to reduce any Aqua increase in rates or would all the proceeds go to the county, which would then determine if ratepayers would be given a stipend to help pay Aqua's rates. Cordisco couldn't say how the proceeds would be distributed, as the county commissioners would need to be consulted.

"I've got mixed emotions," Maguire said about the proposal. "I came with an opened mind." He questioned how the Aqua stockholders would go for the proposal.

Randy Scott of Warrington told the officials that they had "a fiduciary responsibility to customers," while a woman from Doylestown questioned how the authority board thought it was being transparent when the public wasn't given much notice for the meetings, including only a day's notice about the board meeting Wednesday.

Joe Hober of Upper Southampton said that even if Bucks County receives the $1 billion proceeds, he didn't think the deal was fair to ratepayers.

"This affects 17% of the people (Bucks residents who get their sewer service through the BCWSA). The money will go to the entire county. The 17% will have the burden, the rest of the county will benefit. It makes no sense to do the sale. Unfortunately we are affected by this."

A resident of Upper Dublin questioned how out-of-county residents who are served by the BCWSA would be compensated. Cordisco said that he envisioned that all ratepayers would have their rates stabilized for at least 10 years by using some of the proceeds from the sale to establish a fund to help them pay the increased Aqua's bill so that they would have no more out-of-pocket expense than they would if the BCWSA continued to provide the sewer service.

But residents pointed out that was giving Aqua back money it paid to purchase the system.

BCWSA Board Members Dennis Cowley and Patricia Poprik attended both Tuesday sessions. Cowley, who was the only negative vote for the exclusivity agreement two weeks ago, said he's still analyzing the sale issue and hasn't decided how he will vote on an actual sale.

Janet Braker of Northampton said for a for-profit company to buy a nonprofit, "it just doesn't seem credible to me that they can do the work cheaper." And she said that she was concerned over what would be done with the sale proceeds. She pointed out that Lower Makefield, which recently sold its sewer system to Aqua for $53 million, is now trying to figure out what to do with the money.

Aqua Vice President Matthew Rhodes explained that the purchase would be funded with 50% equity raised from stockholders and 50% income from ratepayers. He said the Pennsylvania Public Utility Commission regulates the profit for utilities at about 9% and the stockholders receive dividends of about a 2.5% yield along with any increase or decrease in the value of their stock in the company.

Ryan Connors, a financial analyst with North Coast Research in Jamison, came to the evening session for more information but wasn't opposed to the sale. He had clients who invested in Essential stock. He pointed out that the stock market "is a vehicle for most Americans" to gain wealth, including retirees and others who invest in utility stocks.

Cordisco stressed that there were no private meetings about the deal between the full board of directors and Aqua before the formal offer was presented and that the BCWSA announced the details as soon as possible after the draft agreement was ironed out by the two parties' attorneys.

He said the BCWSA couldn't have announced the details previously because that would have broken the confidentiality that Aqua needed in making its offer. He said a meeting Monday with municipal officials throughout the county "was very productive," and another meeting was scheduled for Tuesday afternoon with BCWSA employees who might have questions about the proposal or how it would impact their jobs.

About 100 BCWSA employees are expected to become Aqua employees if the deal is finalized. Cordisco said his own father had to change jobs in a similar situation at age 60, so he was conscious of the need to take employee concerns into question.

Buckingham Supervisor Maggie Rash who was at the meeting Monday with municipal officials told those at the evening session Tuesday that if they wanted to comment on or protest the potential sale, they should contact their municipal leaders about the issue.

Aqua Pennsylvania supplies water or sewer service to 32 counties in the state. Essential Utilities, as its parent company, serves 5 million people in 10 states. When Franklin was asked before the meeting if a foreign company could ever acquire Essential and gain control of the water and sewer rights in these sections of the United States, he said that if that situation ever developed, he believed that the public utility commissions in those states would prevent the transaction from going forward.

This article originally appeared on Bucks County Courier Times: Bucks County ratepayers question how they will benefit from sewer sale