“Council, do your job on PGW” by Mayor Michael A. Nutter

This editorial appeared in the Philadelphia Inquirer on Thursday, October 30, 2014:

After serving almost four terms in City Council, I have deep respect for its role in government as the People’s Hall, a place where matters of policy, large and small, are debated and then decided in public session with votes by its elected members.

For all the backroom discussions and the maneuverings of lobbyists and special interests, when it comes down to it, Council is the home of transparency, the place where those who want something from the city must stand up and make their case, where they must submit to sharp questioning of every nuance and detail.

It’s because of Council’s special role that all Philadelphians should be upset and disappointed with Council President Darrell Clarke’s stance opposing the mere introduction of a bill to sell the Philadelphia Gas Works and public hearings where the proposed purchaser, UIL Holdings Corp., could make its case and answer months of rumors, lies, and innuendo with facts.

And that’s the second reason Philadelphians should be upset: We have an opportunity to consider an asset sale that would create huge opportunities for new energy jobs, strengthen the city’s seriously underfunded pension system for retirees, and dramatically fix the aging network of gas mains below our streets.

But unless they read the fine print of the report Council released Monday, Philadelphians would not know that Council’s consultant, Concentric, concluded that the sale process was competitive and reasonable, that UIL’s proposal was the best bid, and that PGW’s value was lower than the $1.86 billion price.

Or that UIL explicitly agreed to assume all environmental liabilities related to PGW operations now and in the future.

The Council president asserted that Council conducted an “exhaustive review” of the proposed sale, and yet not a single element of this huge opportunity was submitted to the test of views and questions from Council members or the public in open session. No big city with hopes of attracting business, jobs, and investment conducts business in such a fashion. This is not leadership as we know it. It’s certainly not the history of the City Council that I know.

In its own very brief memo, Council commits a glaring error in describing one of the key terms of the deal: We project that the sale would provide net proceeds in the range of $418 million to $629 million. Council argues that the city would lose its $18 million per year “dividend” from PGW, and therefore the net proceeds would be $200 million to $400 million.

Nothing could be further from the truth. Let’s assume the net proceeds are $500 million. By depositing that amount in the pension fund, the city would see tens of millions of dollars in net savings on how much it is required to put into the fund each year.

With these annual net savings, we’re going to do two things: First, cover the loss of the $18 million PGW dividend. Second, plow the remaining savings back into our pension fund, doing more than state law requires to strengthen a retirement fund that thousands of city employees, current and retired, depend on.

This plan, coupled with other pension reforms achieved by our administration, will move the pension fund into a healthy status more quickly and raise the funding level to above 50 percent within two years of the deposit.

The city general fund would be held harmless and the pension fund would be healthier. That is a unique, once-in-a-generation opportunity. There is no other proposal that achieves both of these goals.

One more example of why we need an open, robust debate on this proposal: With more than 3,000 miles of aging cast-iron pipe, UIL has said it can dramatically increase annual replacement activities through long-term borrowing, something that PGW can’t do with its pay-as-you-go funding model.

What is Council’s proposal to improve infrastructure safety? It calls for a 50 percent rate increase on the funding source of the pipe replacement. Yes, PGW ratepayers, who already have the highest natural-gas rates in the commonwealth, would face an immediate rate hike under Council’s plan.

UIL, which has decided to continue to pursue this sale despite Council’s announcement Monday, offers another approach to infrastructure improvement, along with dozens of other proposals, all subject to change through the legislative process, which would protect consumers, our vulnerable citizens, and the employees of PGW.

But the only way that we’ll get to the truth about this proposed historic sale is for Council to introduce the bill, schedule hearings, give everyone a chance to be heard, and then let Council members do what they’re paid to do – explain where they stand, make choices, and then vote. That’s the way Philadelphia should conduct its business.

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