As officials discuss whether leasing Pittsburgh's parking assets to a private company is the right option to save the city's pension system, Mayor Luke Ravenstahl is considering whether to pursue a similar deal for the Pittsburgh Water and Sewer Authority.
"We have been asked to look at privatizing the PWSA. ... We're going to answer the question of whether it makes sense or not," Ravenstahl said.
Ravenstahl is under a tight deadline to put at least $200 million into the city's pension funds by the end of the year to avoid state takeover. The funds have about a third of the $1 billion needed to fulfill obligations. Ravenstahl continues to seek $15 million in additional annual revenue to cover yearly pension payments.
House Minority Whip Mike Turzai, R-Bradford Woods, suggested privatizing the water authority as a way to conserve resources.
"The city has to change. The focus should be on the core government services," Turzai said. "There are private companies that are union, that do the provision of water. When you go to those companies, they do it more efficiently, in a manner that keeps up with the infrastructure ... and they can make a profit from it."
Atlanta, Indianapolis, San Diego, New Orleans and Milwaukee have privatized water authorities.
"Pittsburgh is not unique. As cities face fiscal crunches, it makes sense to get the best value for money," said Leonard Gilroy, a privatization expert with the Reason Foundation, a Los Angeles-based nonprofit that conducts public policy research.
Turzai said privatization "reduces the city's work force, reduces the city's legacy costs, and in the end the citizens are getting better services and better infrastructure. The mayor's office has been very supportive."
Much like anticipated rate hikes associated with the mayor's parking lease plan, water rates under privatization likely would increase for the PWSA's 250,000 customers, said Michael Kenney, the authority's executive director.
"And they would probably want to raise rates to what the others are charging," Kenney said.
PWSA's rates are 25 to 30 percent lower than those charged by private companies, he said. Based on the average residential household, which uses 5,000 gallons of water a month, the average PWSA customer pays about $45 a month for water and $23 a month for sewage treatment.
PWSA's customer base and the 30 percent unused capacity at its Freeport Road water treatment plant and distribution center could attract investors. Any deal to lease or sell the authority would require officials to erase $790 million in water authority debt, Kenney said.
"There are so many factors that go into a privatization. Until you actually see the dollars, it's very difficult to see how it would be in the best interest of ratepayers or not," he said.
There is no deadline or immediate need for cash to make a potential sale or lease of the water authority worthwhile, said Councilman Patrick Dowd, a PWSA board member who opposes privatization.
"Water is such an important, precious and vital asset," Dowd said. "Water is our most valuable asset. I don't know why we would even consider it."
