THE BURNED OVER DISTRICT

You usually end up with less than you thought they were worth and no more jewels. Such is the state of municipalities who, when strapped for cash, sell off municipal assets hoping for a big score to get them back on their feet again. And the result is all too often the residents that were supposed to be helped end up being screwed for profit. Take the example of Coatesville, PA.

But it wasn’t supposed to be that way, said Carmen Green, a Coatesville councilwoman who served her first term in the late 1990s when the city was soliciting offers from companies for its water system. At that time, Coatesville was experiencing a decreasing tax base resulting from high unemployment and poverty, and officials hoped the sale would generate substantial revenue.

The winning offer came from PAWC, a subsidiary of American Water, the largest investor-traded water company in America. PAWC offered Coatesville $38 million up front in exchange for the city’s water and wastewater assets, which were then owned by the City of Coatesville Authority. At first, Green said she opposed the sale.

“I was just very fearful of the water rates [increasing] and what that would do,” she said. “But as time went on and we began to explore the options, some of it made a lot of sense to me.”

As part of the deal, PAWC promised to modernize water and sewer infrastructure. Officials also hoped to invest money from the sale in a trust fund that would generate enough interest to support roughly 20 percent of the city’s annual expenses and limit tax increases. In the end, Green came around to the deal — but she says she had no inkling how much it would eventually cost Coatesville’s poor.

“We had no idea they would be seeking such a high rate increase. There’s no way that we knew that’s what their intentions were.”...

The supposedly untouchable Coatesville trust fund dwindled over the decade following the water deal with PAWC, as city officials pulled out money for what they saw as emergency needs. The first withdrawal came after a protracted legal fight between the city and the owner of a plot of land that officials wanted to seize for a new municipally owned golf course, which they believed would bring in revenue from out-of-town golfers. But the eminent-domain battle made current officials unpopular, and many were voted out of office by 2005. Carmen Green, who stepped down from the City Council in 2004, chalked up the expensive fight to bad timing and bad press...

By February 2010, after an epidemic of mysterious arsons in Coatesville left many homeless and resulted in millions of dollars in property damage, the City Council fired its city manager and named Wayne “Ted” Reed to the post. Reed had served as the executive director of the city’s water authority at the time of its sale to PAWC and then worked for the corporation as a business-development manager and manager of Coatesville customer accounts until he was selected to be city manager. Two months after Reed’s appointment, PAWC petitioned for the Pennsylvania Public Utility Commission to allow a 229 percent rate increase in wastewater bills for the eight townships served by Coatesville’s Regional Wastewater Plant, owned by PAWC.

Reed says the City Council was not concerned about his ties to the company and, in fact, selected him because its members hoped his connections could help Coatesville negotiate lower rates. After fielding complaints from parties concerned about high increases, the utility commission approved a 216 percent increase in wastewater rates for Coatesville residents, to be phased in over four years. Households in smaller townships served by the plant saw hikes of 197 percent, because they are charged as bulk customers rather than as individuals, as in Coatesville.

There's big money in those utilities if you have your friends in the right places.