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Millcreek water authority assets sale moves ahead

By John Guerriero, Erie Times-News, Pa.
McClatchy-Tribune Information Services

June 08--The move to sell the Millcreek Township Water Authority's assets to Erie Water Works is picking up steam.

Millcreek supervisors have received three proposals from consultants that would place a value on the assets, and the supervisors are scheduled to vote on selecting one Tuesday morning.

It's one of several rapid developments in what appears to be an inevitable sale of the assets.

Other developments include:

- The two water utilities are still trying to reach an agreement in a dispute over bulk-water rates before an arbitrator would rule. The Millcreek authority argues that it was overcharged by $10 million over a decade.

Paul Vojtek, chief executive of Erie Water Works, said a settlement of the bulk-water dispute could then open the door for talks over a sale price for the Millcreek assets, which would include the authority's water pipes, storage tanks and booster stations.

- Vojtek and David Sterrett, executive director of the Millcreek Water and Sewer Authorities, discussed various topics during a meeting Thursday, but they said the price of the assets was not one of the subjects.

The topics, however, related to the sale.

Sterrett said the subjects included the transfer of water and sewer customer billing information to Erie Water Works, a requirement to apply to the Pennsylvania Department of Environmental Protection to transfer the Millcreek authority's operating permits to Erie Water Works, and whether property such as vehicles, filing cabinets and furniture would be included as assets to be sold.

The township could contract with Erie Water Works to also do the billing for the Millcreek Sewer Authority.

Asked what Erie Water Works would gain from the purchase, Vojtek said a larger customer base provides more purchasing power for equipment, thus reducing costs; allows for potential growth in Millcreek and outside the township; and gives the Erie utility "some operational advantages with their facilities."

After the supervisors hire a consultant on Tuesday, a draft report would be expected July 17 and a final report would be due July 25, Supervisor Richard Figaski said.

Figaski and Supervisor John Groh are expected to approve a deal later this year to sell the assets of the authority, which would be dissolved in a move that would make all Millcreek residents customers of Erie Water Works. Supervisor Brian McGrath likely would oppose the deal.

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About 10,000 Millcreek households already are customers of the Erie-based utility, with about 7,400 others served by the Millcreek Water Authority.

McGrath said the three consultants that submitted proposals for the study are: Hazen and Sawyer Environmental Engineers & Scientists, with a regional office in Cincinnati, $45,000, including expenses; professional engineer Frank Impagliazzo and Snavely King Majoros & Associates Inc., of Media, Pa., $19,500, plus expenses; and LWI & Associates Inc. of Erie, $22,500, with no mention of whether expenses would be included.

Impagliazzo is a close business associate of another person hired by Erie Water Works during the arbitration case over the bulk-water rates. But Figaski said there's no conflict of interest because Impagliazzo hasn't done any business with Erie Water Works, the Millcreek authority or the township.

Figaski said the Millcreek authority wants "to tie a conflict in by saying he knows a guy who knows a guy who knows a guy."

Meanwhile, the Millcreek authority received from Gannett Fleming Valuation and Rate Consultants, of Camp Hill, a recommendation that the assets should be sold at a price ranging from $35.7 million to $36.7 million, McGrath said.

McGrath said it makes financial sense for the supervisors to hire a consultant for an independent study.

"When we're talking about a $35 million to $40 million asset, spending $45,000 on a study is well worth the money," he said.

In another development, the Millcreek Water Authority board has approved a severance package for six water employees who would be affected by the dissolution of the authority and the assets sale.

The severance agreement would apply to those who stay until the assets are sold. They would receive six months in salary and six months of continued health insurance coverage, along with $1,000 for every year of service, Sterrett said.

Figaski said the agreement also calls for the authority not to challenge any claims for unemployment compensation benefits. Employees who leave for another job before the assets are sold would receive no severance package.

Sterrett said he hopes the severance package would ease some of the concerns of the employees.

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"Their anxiety, understandably so, is very high," he said.

Sterrett is not now included in the group set to receive the severance package. Six other employees work for the township's Sewer Authority.

Figaski, who is a member of the Water Authority board, said he voted against the severance package the board approved, 4-2, because he believed it was too generous and didn't have enough restrictions.

"What they were giving was way beyond what I think a retention package should have been," he said. "It was more of a golden parachute, in my estimation.

"What it basically does is, it reduces the value of the authority for a potential sale," Figaski said. "And I think it also puts an encumbrance on the authority that could make the sale a little more difficult."

Figaski and authority board member Daniel Eaton voted against the agreement. Board Chairman Dean Swanson and fellow members David Thiemann, Kim Bevelacqua and Kim Parker approved it. Bobbi Strong was absent.

JOHN GUERRIERO can be reached at 870-1690 or by e-mail. Follow him on Twitter at twitter.com/ETNguerriero.

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(c)2014 the Erie Times-News (Erie, Pa.)

Visit the Erie Times-News (Erie, Pa.) at www.GoErie.com

Distributed by MCT Information Services

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