Last week, Pennsylvania American Water, a subsidiary of American Water, announced that it will be acquiring the McKeesport wastewater treatment system for approximately $156 million, making McKeesport the latest municipality in Pennsylvania to utilize public-private partnerships (P3s) to help alleviate fiscal distress.
The McKeesport City Council and the Municipal Authority of the City of McKeesport requested offers from potential buyers in June, and voted to sell the sewer system to Pennsylvania American Water to stave off a potential fiscal emergency. Selling the system, according to McKeesport Mayor Michael Cherepko, was “the only way to save our community from municipal bankruptcy, while continuing to offer the same level of services our residents deserve… This transaction will balance the city’s current financial problems, allow this administration to safeguard the city’s future and ensure reliable wastewater service for 22,000 customers.”
Beginning in 2013 with the adoption of the “Harrisburg Strong Plan” – the innovative financial recovery plan that allowed the City of Harrisburg to avoid municipal bankruptcy and reposition itself for long-term renewal through the sale of its incinerator and long-term lease of its parking system – P3s have become a critical tool for municipalities looking to manage fiscal distress and restructure obligations. Monetizing public assets, if done effectively and responsibly, can position a municipality to overcome fiscal distress in a way that is both more cost effective and faster than pursuing Pennsylvania’s Act 47 program for financially distressed municipalities (or a resulting Chapter 9 bankruptcy filing). Other cities in Pennsylvania, including Allentown, Scranton and Middletown have all undertook to monetize public assets in an effort to alleviate fiscal distress.
MacElree Harvey’s Business and Finance attorneys have experience advising clients on developing innovative ways to identify potential revenue streams and can help local governments evaluate P3 opportunities to monetize public assets. Often, these transactions can be structured in a way that maintains elements of control for the municipality. Attorneys in MacElree Harvey’s Real Estate and Land Use group regularly represent governmental entities, builders, developers and owners in a wide array of land use, zoning and environmental work related to real estate transactions, as well as administrative and judicial proceedings.
If you have questions about available solutions for Pennsylvania’s distressed municipalities, or P3s generally, please contact W. Patrick Scott at 610-840-0229 or [email protected]; Brian L. Nagle at 610-840-0224 or [email protected] or Christopher R. Sullivan at 610-840-0279 or [email protected].
This alert is informational only and not intended as legal advice. Speak with a licensed attorney about your own specific situation.
