Shannon Williams, Executive Director of the Harrisburg Authority, and Mayor Linda Thompson.
Last November, David Unkovic—the city’s former receiver, who resigned in March of 2012 with a single page of urgent, tilting scrawl—sat before the Pennsylvania Senate Local Government Committee and talked about a failed experiment.
The experiment was a 2003 amendment to the state law governing municipal debt. It permitted local governments to enter into interest-rate swaps, the bedeviling financial instruments that, through their potent mix of opacity and risk, helped multiply the pain of the Great Recession. Unkovic advised that the amendment be reversed, and that entering into swap agreements by local governments be banned.
“They’re incompatible with the way public officials and elected officials operate,” he said. He meant that the pressure to do what’s politically expedient often makes it impossible to do what’s financially sound. (As an example, he described a Pennsylvania municipality whose officials, unwilling to take a loss in the limelight, delayed in terminating a swap gone sour, until the toll had grown from $4 million to $24 million.)
Today, at a press conference in City Hall, Mayor Thompson announced a plan to sever political expedience from a major piece of the city’s operations: the sewer and water systems, currently run under a tangled partnership between the city and the Harrisburg Authority. Joining her were the new receiver, William Lynch, whose recovery plan sketches out the general terms of separation, and Shannon Williams, the Authority’s executive director.
The split, for all its merits, is messy. This is partly because of the dizzying complexity of the existing arrangement. The wastewater collection system—the pipes under the streets, the inlets and manholes—is owned by the city, operated by the city’s Department of Public Works, and serves only the city of Harrisburg. The infrastructure for the conveyance and treatment of wastewater, including “interceptor” sewers, pumping stations, and the sewage treatment plant, is owned by the Authority, leased to the city, operated by the city’s Bureau of Sewage, and serves Harrisburg along with several outlying townships and boroughs. The water system is owned by the Authority, leased to the city, operated by the city’s Bureau of Water—you get the idea.
Under the terms of the transition agreement, the city will relinquish every piece of both systems to the Authority. The Authority will take over operations, assuming the city’s current employees under a collective bargaining agreement, adopted Wednesday night by the Authority board. It will also acquire the collection assets (pipes, inlets, manholes) that the city currently owns. It will cease to be the money-printing enterprise it had become through the machinations of former Mayor Stephen Reed, whose compulsive exploitation of its power to issue debt was written about at length by Nick Malawskey, in an investigative report for the Patriot-News.
“It used to be a financing authority. It’s now transitioning to an operating authority,” Bill Cluck, chairman of the Authority’s board of directors, said.
For everything it’s giving up, what will the city receive in exchange? At the press conference, the mayor was at pains to define the primary gain as freedom. “This action removes the city’s liability for antiquated infrastructure,” she said. The agreement was about “liberation,” she added later; the Authority would have to “stand on its own, on its own borrowing,” allowing taxpayers “to be free from these types of convoluted deals.” When someone asked whether the change would result in a rate hike, she sounded almost gleeful. “The Harrisburg Authority will be completely independent,” she said. “As an elected official, that won’t be my concern.”
One needn’t look far to find the reasons for Thompson’s relief. The historic abuse of the Authority, particularly in the form of the staggering incinerator debt, backed by the city’s guarantee, was a profound betrayal of Harrisburg residents. (It was also, incidentally, a reversal of one of the Authority’s original purposes, which was to insulate taxpayers from the cost of capital utility projects by tying them to user rates instead of city budgets.) In addition, the impending tally of system improvements, required for compliance with state and federal environmental law, would likely have been too high for the city to absorb.
But the claim of complete extrication is a bit misleading. In the first place, the Authority and the city remain intricately linked. As part of the agreement, the Authority has pledged to pay for future green infrastructure improvements undertaken by the city, under terms that have yet to be decided. The city has committed to street-cleaning services essential to the sewers’ smooth function. And the Authority, recognizing the city’s solicitor couldn’t navigate the specialized legal matters involved, is paying for the city to retain a separate lawyer.
Second, the idea that the city is now “free” puts the reality rather backwards. The benefits to the Authority extend far beyond the acquisition of the city’s wastewater assets. The agreement has granted the Authority access to $26 million from PennVEST, the state’s infrastructure investment program, whose first condition was that the Authority shed its connection to the city. Williams also said that the Authority would seek to repair its credit rating, which dissipated largely because of dysfunction in city government. (Moody’s downgraded the Authority’s bond rating, and ultimately de-rated the Authority, as a direct consequence of the city’s failing to submit financial audits on time.)
In short, the Authority, in severing its operations from the city, has removed itself from the toxic reach of political maneuvering. “They appear to like and trust us at the Authority,” Cluck said, referring to the EPA and the Justice Department, with whom his board has been in negotiations. “We aren’t subject to political pressures.”
Perhaps the question of who is liberated from whom puts matters in the wrong frame. We’re still speaking, after all, of the city’s authority, with a board appointed by the city’s mayor, and approved by City Council. The Authority’s customers are the city’s voters; the city’s streets perch above the Authority’s pipes. What requires separation is not only water and politics—it’s also the city’s aspirations for recovery and its sordid financial past, to which it is still unfortunately bound. “Like a bird on a wire,” as the Leonard Cohen song goes. We will try, in our way, to be free.
