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The Pittsburgh Water & Sewer Authority (PWSA) is a municipal water authority serving more than 300,000 people throughout Pittsburgh and surrounding areas. PWSA is the largest combined water and sewer authority in Pennsylvania, producing an average of 70 million gallons of water daily. The 250 employees are city residents and PWSA customers with expertise in engineering, operations, maintenance, water quality, customer service, safety, green infrastructure and a number of other disciplines. • We strive to constantly improve our operations to enhance the way we do business in a safe, sustainable and customer-friendly manner. • The PWSA sewer system is composed of 1,200 miles of sewer lines, approximately 25,000 catch basins and four pump stations.
The sewer collection system is primarily a combined collection system that serves the entire City of Pittsburgh. It also serves as a conveyance system for portions of flows from 24 neighboring municipal communities. The wastewater collected by the PWSA system is conveyed to the Allegheny County Sanitary Authority (ALCOSAN) for treatment.
Mayor William Peduto named a Blue Ribbon Panel in March 2017 to advise the city on a possible restructuring of the Pittsburgh Water and Sewer Authority. The panel of government, nonprofit, business and energy leaders was tasked with studying ways to improve and optimize Pittsburgh’s publicly-owned water and sewer asset, and to advise the Peduto administration on the hiring of an advisory firm to help guide those efforts.
Infrastructure Management Group is an advisory firm specializing in the management, performance, organization and financing of public-use infrastructure facilities. In partnership with its various sister companies, including IMG Advisory, IMG Rebel, Rebelgroup and IMG Capital, Infrastructure Management Group provides services to governments in the US and around the world through a network of offices in North America, Europe, Africa and Asia. Its business focus include water and sewer utilities, airports, surface transportation, energy and social infrastructure.
Since its founding in 1994, IMG has helped hundreds of government infrastructure agencies dramatically improve their service processes, implement cutting edge management technologies and develop new business strategies for overcoming major financial and operational challenges. It also supports their efforts to forge successful partnerships with private investors, developers and operators to finance new facilities and improve existing ones. IMG is typically engaged by elected officials at all levels of government, and by the governing bodies of infrastructure agencies. The company is the prime contractor on most of its engagements, supported by a variety of well-regarded engineering, technology, legal, accounting, finance and operations firms.
For the restructuring of PWSA, IMG is supported by a Technical Team of Tetra Tech, Uberlytics and Woodward & Curran, an accounting and finance team of Grant Thornton, The Meridian Group Limited and K Bealer Consulting, a Legal Team of West Group and Buchanan Ingersoll & Rooney, and a Public Outreach Team of Actual Size and Evolve EA. The engagement is organized into two phases: Assessment, which will take about five months, and Restructuring which will take approximately nine months or more depending upon which restructuring option is selected.
Over the past decade, PWSA has experienced a wide variety of chronic operating problems and structural financial difficulties. None has been addressed in a comprehensive fashion or with broad stakeholder support. 2017 found the utility mired in debt and lacking essential resources despite significant scheduled rate increases, with pressing system repair and replacement needs totaling in the billions of dollars. The City, led by Mayor Peduto, decided that PWSA’s problems were so significant that a major restructuring of some kind was required. The IMG Team was selected from a large number of multi-disciplinary advisory teams and firms proposing to assist the City with the restructuring.
PWSA suffers from an aging underground water distribution and sewage collection infrastructure that is in desperate need of repair. The organization also lacks the requisite management tools and depth of staff expertise necessary to operate the system to contemporary standards even if its infrastructure was in an acceptable state. Each of the restructuring options being considered is designed to address these problems together and as a single bold initiative, rather than as piecemeal improvements.
The first phase of the engagement, Assessment, includes high-level investigations of the PWSA system’s current condition, as well as its operations and maintenance practices. Its accounting systems, financial condition, customer service, billing, information systems and governance protocols are also being evaluated to understand which options might offer the best solutions to the organization’s problems. Finally, each option is being evaluated for its legal and institutional feasibility and for its potential impact on PWSA’s ratepayers. The results of these reviews will be summarized and presented to the City, the PWSA board and the Mayor’s Blue Ribbon Panel on restructuring. A decision on the preferred option is expected to result from their deliberations.
In the second phase of the engagement, the IMG Team will assist the City with the implementation of the Preferred Option. IMG and its Team members have significant experience in implementing the restructuring options being considered.
Privatization usually refers to the sale of government assets to a private for-profit entity with relatively few restrictions on the quality provided and the rates charged to consumers. The privatization of parking in Chicago, in which the parking garages, lots and meters were transferred in exchange for a large upfront cash payment to the City of Chicago, with little limitation on parking rates and charges, is an example of privatization. The sale of the United Kingdom’s airports to a new, private, for-profit entity is another example of privatization.
This contrasts with a Public-Private Partnership (P3), where ownership of the utility usually stays with the government; instead, the utility is leased or contracted to a private partner, who then operates, maintains, and improves the utility according to detailed requirements established by the government. In a P3, the private partner’s role can range from from that of a hired hand to a that of a business partner. The government reserves the right to cancel the agreement if the private entity fails to meet the government’s requirements. Moreover, the government continues to set the rates to charged to consumers, either through the lease/contract or by continuing collecting all of the revenues itself.
Regulated utilities, whose rates and quality of service are tightly regulated by a state Public Utilities Commission (“PUC”) rather than a city government neither privatization nor public-private partnership. Rather than exercising control through a lease or a contract, the PUC has the power of law to force the utility to meet high water and service quality standards and to strictly limit what it can charge consumers. The PUC’s oversight is constant: it requires and incentivizes the utility owner to keep the system in good repair and to make needed investments. The PUC also tightly regulates how much of a return the utility can earn on its capital investments, and it usually does not allow any profit at all on the operations.
On November 2nd there will be an interactive Public Workshop held from 5:30-8:30 PM at South Side Market House, 49 South 12th Street, Pittsburgh 15203. The workshop, which is open to the public through registration on this website, is intended to be an informative, accessible, and interactive conversation between the public, the PWSA, the City, and the City’s consulting team. The workshop is designed to allow community members to be part of the restructuring discussion, including the opportunity to articulate and prioritize values. It will also include a fun and interactive exercise to acquaint participants with the PWSA improvement options being considered by the Mayor’s Blue Ribbon Panel. The results of the workshop will be shared with the City and the Panel.
After the Panel’s public meeting on November 8th, there will be at least one additional opportunity for public input as the Panel deliberates the restructuring options. The public also has the ability to provide input and feedback online at any time through this website under the Community Input tab. Updates on the schedule will be posted on the website as soon as they are available.
The Panel has been empowered by Mayor Peduto to consider an array of wide information on PWSA restructuring options, including public input, through an open process leading to a recommendation to the Mayor and City Council that they (the Panel) believe is in the best interests of the community at large. The Mayor has made it clear that neither he nor the Panel are entering into the evaluation process with a preconceived notion of which restructuring option better serves the public interest. Among the criteria to be used by the Panel are:
- the effectiveness of the option in fixing PWSA’s problems,
- the certainty that the option will fix the problems, with no chance of backsliding,
- the speed at which the option will address the problems, with little risk of delays, and
- the impact of the option on household water and sewer rates.
It is important to note that this process is not about lead and other water quality issues. Rather, it is about restructuring a troubled PWSA so that it can once again perform as a “best in class” water and stormwater utility. The Panel will be paying particular attention to which of the options best guarantees that needed infrastructure improvements are made, and made quickly. This includes those improvements needed to ensure that Pittsburgh’s water meets or exceeds state and federal standards, including public safety.
The consultant’s report that is currently being prepared will specifically address these questions. A “baseline rate forecast” is currently being prepared by PWSA staff and the IMG Team. This forecast will show what is likely to happen to water and sewer rates if PWSA is not restructured. That forecast will then compared to similar projections for each of the restructuring options. Moreover, the report will discern what differences might arise in each of the options for green infrastructure, water quality and billing services. This report will be presented to the BRP through an open meeting accessible to the public on November 8th. The report will also be made available on this website for public review.
As noted above, a key focus of the consultant’s report will be the overall impact on household water and sewer rates. Moreover, the report will also address how and to what degree each of the options ensure public accountability.
Mr. Robert Weimar is currently serving as interim Executive Director of PWSA, having been appointed to that position by the PWSA Board in July of this year. He is likely to continue to do so and to assist in the implementation of whatever restructuring option is ultimately chosen. Any change to Mr. Weimar’s status will be a decision of the PWSA Board.
The consultant’s report will carefully consider how each option would affect PWSA’s use of green infrastructure (as opposed to “gray” concrete and iron infrastructure), including an explanation of the mechanisms other cities have used for ensuring that their green infrastructure goals are met. This report will be presented to the Panel and the public on November 8th. The report will also be made available on this website for public review.
The draft City-Wide Green First Plan is available to the public through PWSA’s website.
It is premature at this point to suggest whether a stormwater fee or some other means of funding stormwater-related improvements will be implemented. However, Pittsburgh’s stormwater pollution problem is serious, and it will be very expensive to address to a level that meets EPA water quality standards, regardless of which restructuring option is chosen. Some revenue source is likely to be needed, but the exact form may or may not be chosen as part of the restructuring process.
An obvious goal of any restructuring option is smooth coordination with the City and other public authorities, including ALCOSAN. The consultant team has met with ALCOSAN, and they have stressed the importance of a cooperative, data-rich working relationship, as well as the reliability of the restructured partner, whatever its form, in carrying out a shared regional water quality improvement agenda.
PWSA has experienced far more than its share of leadership turnover. One of the main goals of the restructuring process is to stop that turnover and strengthen management overall. The consultant’s report will speak specifically to the need for stability, management quality, service culture, and improved labor relations, as well as how each of the restructuring options would seek to improve them.
Regionalization is when multiple smaller departments or authorities from multiple municipalities join together or join a larger department or authority to work strategically over a larger service area. It is clear from conversations the consulting team has had with local stakeholders that today’s PWSA, is not considered a suitable partner, let alone a foundational platform, for regionalization. In fact, under some restructuring options, it could be many years before PWSA’s reputation rises to the level at which small suburban systems would consider joining it to form a regional authority. However, as environmental regulations grow evermore stringent, especially for stormwater, suburban communities may find that a restructured PWSA could offer important economies of scale such that, it may be much cheaper for PWSA or ALCOSAN to address regulatory compliance issues than it would be for smaller communities to do it themselves. While some of the restructuring options may lend themselves to regionalization, it is not the focus of the consultant’s restructuring report.
Yes, it is possible, however having yet another water utility in the region, one that also has its own funding mechanism, could complicate the already-challenging process of coordinating water infrastructure investment activity in Greater Pittsburgh. Ideally, a stormwater collection system, particularly one that emphasizes green infrastructure, should be well-integrated with both the other collection systems and the sewage treatment systems. One alternative is the creation of a separate financing entity, one that collects stormwater-specific revenue and then either distributes the funds to PWSA and ALCOSAN or issues bonds on their behalf.
Rate base is defined as the value of assets on which a utility is permitted to earn a rate of return, which is established by the regulatory agency overseeing such utility. The rate base is equivalent to the dollar value of past investments made by the utility, as well as some investments that have yet to be made (but are imminent), and have been approved by the regulator. In Pennsylvania, that regulator is the state Public Utilities Commission (PUC).
A few utilities provide their services through a private not-profit charitable trust. Indianapolis’s Citizens Energy Group is the largest by far in the United States. It provides gas, water, and wastewater service within Marion County, Indiana, which encompasses the greater Indianapolis region. Specifically, Citizens Energy is a fully independent and self-perpetuating trust: its Board of Trustees appoint their own new members to replace retiring members, and they also appoint the Board of Directors, which governs the utility’s management and operations. There are no appointments by Indianapolis’s mayor or governor. The closest parallel to Citizens Energy in Pittsburgh – in both size and governance – is the University of Pittsburgh Medical Center (UPMC). A non-profit charitable trust’s goal is to operate with the focus, flexibility (it is free of political influence and government personnel and procurement rules), and growth-orientation of a private for-profit entity, but with a clear public service mission and without investors (except in the bonds that it issues).
A non-profit charitable trust is an alternative to all other forms of utility governance. It is free to conduct its mission through whatever means it deems to be in the public’s best interest. It usually does so with its own employees (Citizens Energy’s employees are considered “public” employees) and its own financing, but it is also free to engage in various forms of partnerships, whether with investment entities for addressing infrastructure needs or with operating entities to provide service. As a non-profit entity, it also usually has the ability to issue tax-exempt bonds or to work with a public entity that does. Citizens Energy is regulated similarly to an investor-owned utility by Indiana’s public utility commission. A PWSA restructuring option based upon the Indianapolis charitable trust model will be discussed in the consultant’s report to the Blue Ribbon Panel.