Published Date Written by David Amerman
Middletown Borough Council formed an exploratory committee on Monday, March 3 to pursue leasing the borough’s water and sewer system, a possible alternative to raising residential sewer rates by 58 percent to cover a deficit in the borough’s budget.
The vote to form the committee came after Mayor James H. Curry III immediately vetoed a decision by an apprehensive council to increase rates. Curry said he wanted to explore a lease, a proposal made by one of three councilors who had voted against the increase.
At a previous council meeting in February, a water and sewer rate study was presented by Mark Spatz of Herbert, Rowland, & Grubic, the borough’s engineering firm. Spatz projected that Middletown’s debt would escalate by $5,001,652 over the next four years if nothing is done to prevent it.
While some councilors said the data behind the proposed rate increase was undoubtedly sound, and moving to approve it was undeniably necessary, it was evident that councilors did not want to thrust it onto its citizens.
“This is a big step, but it’s imperative that we do it,” said Councilor Robert Louer. “It’s going to hurt me personally, but the town is the thing we’ve got to be looking out for, not personal individuals.”
Council President Christopher McNamara also professed similar consternation, but tried to depict the dire news in a more optimistic light.
“Fifty-eight percent sounds like a lot, but that’s for the average bill,” said McNamara. “That doesn’t mean that everyone’s bill is going to go up.”
Despite great apprehension, the council approved the rate increase by a 6-3 vote.
However, Curry immediately vetoed it, because Councilor Benjamin Kapenstein – one of the three ‘no’ votes – mentioned earlier in the meeting that he had ideas for an alternative solution.
“I think we need to hear Mr. Kapenstein’s presentation,” said Curry, whose veto was met with applause from the audience. “I think before you vote on something, it’s necessary to hear all options. This is a very big decision and I think that, before you move forward, we should hear what he has to say.”
Kapenstein, who will serve on the exploratory committee with McNamara and Middloetown Borough Authority Chairman John Patten, suggested implementing a long-term lease of Middletown’s water and sewer facilities and putting out a request for proposal (RFP) to assess the facilities’ true market value.
He then cited this arrangement’s success in Allentown, where a 50-year lease was established.
“The value they received from the deal far exceeded their expectations and those of most industry observers,” said Kapenstein. “If this process is handled correctly, the borough may retire all of its considerable current debt, reduce its pension and other post-employment benefit liability, and have significant revenue remaining to address our other fiscal concerns not just for 2014, but for many years to come.”
Kapenstein’s fellow council members all voiced support for this plan, but McNamara expressed concern about the timetable for it, since the process for the lease would take another month.
After council approved a motion to create the committee – and have the borough solicitor and Susquehanna Group Advisors, its financial consultant, develop an RFP for the lease – Patten stepped up to voice words of caution to the council.
“In the Allentown case, they’ve lost control of their assets for the next 50 years,” he said. “You may call it a lease, but the people who hold that lease control that authority. That includes rates.
“As you go through this process, make sure you fully understand what you’re doing when you lease the authority,’’ he warned. “You lose control of that asset for whatever period of time the lease is.”