Penn Hills hires Public Financial Management to appraise its sewer system

Penn Hills council hired a financial firm March 15 to appraise its sewer system despite concerns voiced by the mayor that the municipality is “on a frightening path.”

Council voted 3-2 in favor of hiring Philadelphia-based Public Financial Management (PFM) to look into how much the municipality’s sewer system is worth. Mayor Pauline Calabrese and councilman Frank Pecora dissented.

PFM will do the work for a one-time fee of $8,000 plus expenses, such as meals and travel, which have been capped at $500.

“Let’s be honest, the only purpose of doing this appraisal is the same reason why you would appraise your house,” Calabrese said.

The mayor has been a strident critic of hiring PFM, saying the move could lead to privatizing the system, which could lead to higher rates and laying off municipal employees.

She said Penn Hills is on a path of “chipping away” at its ownership of assets, citing plans involving switching the library and the senior center to nonprofit status and leasing or selling the William McKinley Community Center.

“People have to stay awake because it is frightening what is happening here. I feel like I’m looking in the rearview mirror and I’m watching what’s happening to the municipality as I watched what happened to the school district. They were very, very short-sighted back then, and I feel we’re on a very frightening path,” she said.

The Penn Hills School District is more than $159 million in debt largely due to the construction of the high school and elementary school.

Other council members felt differently.

Deputy Mayor Catherine Sapp said the municipality should know what the sewer system is worth.

“I’m not interested in privatizing anything. However, I do feel strongly that we should definitely explore options,” Sapp said.

Councilman John Petrucci said knowing the system’s worth would help the municipality determine better insurance rates and coverage.

“If a catastrophe were to happen at one of these plants, we need to know exactly what it’s worth and what it’s insured for and if we have enough money to pay for the damages,” he said.

The discussion kicked off in February when council tabled an item on its agenda that would have hired PFM then. An agenda-setting meeting was set for March 8 in order to discuss it with the public. A majority of the people who tuned in to that meeting spoke against hiring PFM.

The company will analyze the municipality’s sewage system and come up with an estimated appraisal. PFM will also provide the municipality with an idea of what rates might be under new ownership. The system, as it stands, includes 245 miles of sewage pipes, 12 pump stations, seven equalization stations, two sewage treatment plants, 13 emergency power generators, 7,172 manholes and 65 storage tanks.

Officials have estimated the municipality still owes around $54 million of sewage system-related debt it accrued in the 1990s. The debt, which officials say will be paid off by 2034, came when the federal government mandated Penn Hills to update its crumbling system that led to sewage overflows into rivers and streams.

Selling water and wastewater systems became possible after the state’s Act 12 of 2016. It allows municipalities to sell systems for a price based on the fair market value of the system.

PFM has helped 32 municipalities through the process of appraising sewer systems, according to a document that lists the company’s engagements.

The list includes whether an entity then decided to pursue a sale or lease of the sewer system. Of those 32 municipalities that hired PFM, 10 sold their systems and nine terminated the process, meaning they kept ownership. Another 14 were in process at the time the document was provided to Penn Hills Manager Scott Andrejchak on Jan. 6.

Brentwood Borough was listed as an entity in process. However, the borough approved a $19.2 million sale to Pennsylvania American Water Company in December.

The document also listed which utility companies bought the systems, with Aqua America and Pennsylvania American Water Company buying up the most.

A representative from PFM was not immediately available to comment.