The region’s biggest natural gas utility floated a pitch worth more than $1 billion to help restore and manage the troubled Pittsburgh Water and Sewer Authority, trying for months to curry support within Mayor Bill Peduto’s administration.
Peoples Natural Gas is among nearly 20 companies that have shown unsolicited interest in fixing up PWSA over the past 18 months, Mr. Peduto said Wednesday, although it’s the only firm that confirmed to the Pittsburgh Post-Gazette that it approached the city. Kevin Acklin, the former Peduto chief of staff who dealt with Peoples and other suitors, now works for the North Shore-based gas company.
Mr. Acklin left city hall in January and joined Peoples as vice president and chief legal officer. A lawyer, he said the job offer — and others elsewhere — materialized only after he declared in December his intent to leave the administration.
“My connections to city hall are deep. I would never misuse them,” said Mr. Acklin, who vowed not to “take advantage of those relationships.”
He said PWSA, and whether Peoples might have an eventual role there, never came up when he discussed a job with the company. Likewise, Mr. Peduto said he sees no conflict in Mr. Acklin’s new role. City and state rules ban former public workers from paid lobbying before their prior government employers for at least a year after departure.
Still, PWSA board member Deborah Gross bristled when told about Peoples’ contact with the city. Email correspondence obtained by the Post-Gazette shows CEO Morgan O’Brien foreshadowed a forthcoming “indicative offer” to the administration in December 2016, three months before Mr. Peduto’s office announced a public blue-ribbon panel to assess restructuring options for PWSA.
At least two PWSA board members, not including Ms. Gross, helped supply the authority’s financial details to Peoples. Ms. Gross also sits on city council.
“I thought we were having really a shared conversation with our public and with our administration, and now it sounds to me that some people were not sharing,” she said.
“What is this conversation?” she went on. “I feel I was misled. We were having a public conversation on the future of our water system. And It seems that other people were having a separate, private conversation.”
While Peduto spokesman Timothy McNulty declined to respond Wednesday night, Mr. Acklin maintained earlier that “we were very public about the fact that there were numerous conversations underway.” He cast as routine a nondisclosure agreement with Peoples that’s referenced in administration correspondence.
Generally, Mr. Acklin said, the Peoples proposal was for a partnership under which the company would have assumed roughly $1 billion in PWSA debt, invested private money in deteriorated infrastructure and kept rates from skyrocketing.
A copy of the plan wasn’t immediately available, but the terms could divide future proceeds between Peoples and the PWSA, Mr. Acklin said. Mr. O’Brien confirmed the previously undisclosed overture, saying his company could replace gas and water lines at the same time. Peoples also could employ its call center and billing practices for PWSA accounts, he said.
PWSA has struggled the past few years with customer service, boil-water advisories, broken pipes and lead contamination, among other woes.
“Unasked or uninvited, I made [a] proposal to the mayor that we’d be interested in privatizing or a public-private partnership to try to fix it,” Mr. O’Brien said. The company’s effort, now effectively dormant, never crossed into negotiations, he said.
Private-sector interest in the city-owned PWSA gained speed in mid-2016, around the time state regulators ordered mandatory replacements of lead service lines, Mr. Acklin said. The Peduto administration assembled the blue-ribbon panel largely to evaluate those expressions of interest and what approaches might work best to strengthen PWSA, he said.
Ms. Gross said such direct offers “would be news to me, and I would certainly like to read them, as a board member and council member.”
The panel chose Infrastructure Management Group of Washington, D.C., to help with the evaluation. Council and the PWSA board agreed to pay the consultant up to $550,000.
IMG chairman Steve Steckler said his group followed up on eight expressions of interest, including those from Peoples, Pennsylvania American Water Co., Duquesne Light and Aqua Pennsylvania. Pennsylvania American and Duquesne Light representatives said their firms made no formal proposals and that discussions, if they occurred, were of the most general nature.
In a statement, Aqua Pennsylvania said it would “welcome the chance to be part of the solution” at PWSA, but did not confirm an actual offer.
Mr. Peduto and Mr. Acklin maintained that Peoples received no better treatment than any other company that came calling. PWSA board member Paul Leger said he learned about the Peoples talks because he was asked to assemble documents on the authority’s finances and share them with the company.
“All of that is public information, so anyone who would ask for that would get it. They just asked for some basic financial information,” Mr. Leger said. Although “they weren’t the only private company that has expressed interest over the years,” he said, they are the only one for which he pulled together financial details.
Meanwhile, Mr. Peduto reiterated Wednesday his promise to keep PWSA publicly owned. He’s following a panel recommendation in December to restructure board governance at the authority, a process that will likely require approval from city council.
Should the authority pursue help from the private sector, the mayor said, it will follow a “fair and open” process to request formal proposals and evaluate each one.
Mr. O’Brien said Peoples remains interested. Jim Turner, a PWSA board member since May, said he heard only rumors of proposals from private entities. Chaton Turner, who joined the board at the same time, said she didn’t know Peoples had made a concrete offer.
Debbie Lestitian, who chaired the board last year and now serves as the authority’s chief corporate counsel and chief of administration, was not available for comment, according to an authority spokesman. Robert Weimar, the PWSA interim executive director, said he’s focused on keeping PWSA a public agency.
“I have seen nothing,” he said of Peoples’ overtures, adding that he didn’t need to know the details. “I’m sure it’s all about trying to help the city with debt and other things, which is notable.”
Adam Smeltz: 412-263-2625, asmeltz@post-gazette.com, @asmeltz. Anya Litvak: 412-263-1455, alitvak@post-gazette.com. Rich Lord: 412-263-1542, rlord@post-gazette.com.
First Published: February 22, 2018, 12:30 p.m.
