Public hearings set for potential MABS sale
KAYLEE LINDENMUTH / SHENANDOAH SENTINEL - The entrance to the Municipal Authority of the Borough of Shenandoah property in Raven Run on Oct. 1, 2020.
SHENANDOAH – The borough has scheduled a pair of public hearings to discuss the potential sale of the Municipal Authority of the Borough of Shenandoah.
The meetings are set for Oct. 19 and 26 at 7:00pm, and are intended to gather community input and educate the public on the process and proposals. The location will be announced at a later date, according to borough manager Anthony Sajone.
According to a media release, $23 Million to $25 Million in system improvements over the next 10 years are needed for MABS, citing a Pennsylvania Economy League review of the authority.
“As a result, MABS’ user rates are expected to increase by up to 90 percent, unless MABS declines to undertake necessary improvements,” the release says.
The proposed buyer is Aqua Pennsylvania, Inc., according to the release. The release adds that anticipated benefits include rate stabilization, projected lower rates than what would be possible under MABS “given the cost of necessary improvements,” a net return of over $6.5 Million to the borough for government services, and job security for the authority’s current full-time employees.
“MABS has lost hundreds of thousands of dollars in water revenue in recent years due to water leakage and other water system issues that require corrections that could significantly escalate future user rates,” the release states, adding that MABS had recently defaulted on past debt and taken on new debt to stay afloat “and does not appear to have any long-term prospects of addressing the operational and capital needs of the system.”
Borough Council hasn’t deliberated or voted on the sale, and no action will be taken until the public hearings and community engagement process hhas been completed.
The borough formally began the process to put MABS up for sale in 2017, authorizing a Request for Expressions of Interest and Qualifications. According to the release, three responses were received, and subsequently, a request for proposals for the sale or lease of MABS was authorized in June of 2019.
Two bids were received and vetted, according to the release, and terms were negotiated with the apparent highest bidder, and an asset purchase agreement for the sale has been prepared, according to the release.
If the sale were to be approved, Aqua Pennsylvania would pay $12 Million + accounts receivable. The borough would then use $5.5 Million of the proceeds to pay off MABS’ debt.
The water system, including the plant, distribution system, towers, easements, and water sources would be transferred, as would costs and risks associated with regulatory compliance.
The existing windfarm and telecomms tower leases would be retained by the borough, generating about $112,000 annually.
Aqua would invest around $8 Million into the water treatment plant and around $15 Million into the distribution system over the next 10 years. Such an investment by MABS, the release states, would result in a 90 percent rate hike.
Under the purchase agreement, current rates would be frozen until around 2023 or 2024. According to the release, MABS and Aqua base rates for a user using 3,000 gallons is about $2, though the difference increases with higher usages.
Full-time MABS union employees are expected to be retained by Aqua, and most union employees would receive raises and comparable health and dental plans as well.
The release states that the MABS Board of Directors was restructured following the 2019 election, and has “indicated it is now averse to the proposed sale… before any public hearings or input.”
MABS retained special counsel in March to “research, investigate, and commence legal action if warranted against the Borough of Shenandoah… to stop the proposed sale of the Shenandoah water supply, treatment, and distribution system and any other authority assets because the authority has determined that said proposed sale is not in the best interests of the Authority or its customers.”
The borough’s release states that MABS has refused to attend workshops or special information sessions regarding the sale, though the MABS board alleged in March they were left in the dark.
“The board was not part of a vote to sell the authority, the board was not involved in any meetings,” Solicitor Joseph Nahas said in March. “One of the issues that the board has is that the board members feel that they were not a part of the process, they aren’t comfortable with the way the process has proceeded up to date, and they want to retain a law firm to investigate whether or not the process was correct, how it’s being handled.”
About Author
