Pittston will pay off debt, self-fund projects and add millions to a reserve fund with the $26 million sale of the city's over 100-year-old wastewater collection system, Mayor Michael Lombardo said.
Pennsylvania American Water and the city announced the purchase agreement on Friday. The Pennsylvania Utility Commission (PUC) must approve the agreement. Lombardo expects that to take 10 to 14 months.
"I'm very excited about this deal,” Lombardo said.
Pennsylvania American Water has agreed to make necessary collection system upgrades, which are expected to total more than $5.1 million over five years, according to a release from the utility. The company plans to make significant investments in main replacements, technology updates, security and safety systems and geographic information system improvements.
“We’re committed to our customers, providing high-quality water and wastewater services to help protect public health and the environment,” Pennsylvania American Water President Justin Ladner said in the release.
Pennsylvania American Water, the largest water and wastewater company in the state, is Pittston's water provider.
The utility owns and operates several wastewater systems in Luzerne, Lackawanna, Monroe and Pike counties, including in Scranton and Dunmore, Manwalamink, Blue Mountain Lake, Foster Twp., Pocono and Saw Creek, according to spokesman David Misner. Across Pennsylvania, the company has 29 wastewater systems. Combined, they serve approximately 115,000 wastewater connections throughout 17 counties.
The Wyoming Valley Sanitary Authority will continue to be Pittston's wastewater treatment provider.
A threat off the table
After the city established a Home Rule Charter in 2013, officials began to analyze what Lombardo called "variables" that could impact the operation of Pittston.
"What are the sort of the threats that exist out there in terms of our operation, the things that in the future could be kind of, of heavy consequence,” he said.
Lombardo said in the last 20 or so years the city’s largest debt load came from sewer projects.
"I believe we take the single largest threat off the table that we have in terms of financial unpredictability," he said of the sale.
Pittston has a conveyance system, meaning it transports sewage and stormwater to the Wyoming Valley Sanitary Authority. The city also has a combined sewer system. The pipes have dual chambers — one side is for sewage and the other for stormwater. When there’s a heavy storm, that stormwater overtakes the whole system, Lombardo said.
"So when we have a problem with our sewer, unless it's a broken grate, we can't fix it, which means we've now got to get a contractor in, which means now we've got this cost that is not containable," Lombardo said.
The city has a consent agreement with the Department of Environmental Protection, which regulates sewer systems, since their sewer system is not up to date.
"So the short of it is, we got to get it fixed,” he said.
Lombardo added that the city is not using the sale as a way to pay off debts, like Scranton did when the city sold its sewer authority to PA American Water for $195 million in December 2016.
Pittston moves forward
Lombardo said the city did its due diligence.
Pittston got a valuation on their sewer system. Wyoming Valley Sanitary Authority offered a price less than that valuation to take over the system, Lombardo said. Then they put out requests for proposals. Ultimately, the PA American Water offer was the best and very close to the valuation, the mayor said.
The transition to Pennsylvania American Water should be relatively seamless, Misner said. Pittston customers would be brought on at current collection rates at the time of the transaction close. Rates are set by the PUC.
"We will communicate directly with new customers closer to the time of the acquisition regarding any changes to payment schedules and methods, our income based financial assistance program, etc.," he said.
Lombardo acknowledges that costs may increase for residents. But with the sale, Pittston will also create a fund to help mitigate those increased utility costs.
The funds will also help the city make various other community improvements, including support of the Market & Main project, a seven-story building that encompasses housing, retail and the 630-seat American Theatre.
“I'm very comfortable with where we are … and again, for us, it wasn't a ‘have to’ situation … we're going to use the money to move forward,” Lombardo said.
