The City of York was facing an unsustainable financial situation, which would have required significant tax and fee increases and painful cuts to essential services – including the police department – to balance the budget and pay the City’s bills. Such a plan would have been catastrophic to City residents and businesses and would have likely reversed the recent economic gains that have been made in the City of York.
To save the City from a “doomsday” scenario, Mayor Michael Helfrich proposed selling the City’s most valuable financial asset – the City’s wastewater system, which included the treatment plant and collection system. The sale went into effect in 2022.
Reasons for Proposed Sale
How did the City of York get to the point where it could not meet its financial obligations without large tax increases and deep cuts to services?
In past years, the City relied upon borrowing and short-term budget fixes to stave off significant tax hikes. Pension payments were put off, gradually digging a deeper financial hole for taxpayers. The City had drained its saving to keep taxes at bay. However, due to decades of financial strain, the tax rates in the City of York have remained the highest in Central Pennsylvania.
Were there any other options, besides raising taxes or selling the wastewater treatment system, to meet the City’s needs?
No. We had been fighting the battle with both hands tied behind our backs, left with few options under Pennsylvania’s outdated and hopelessly broken tax laws. Independent experts agreed the sale of York’s combined wastewater treatment plant and sewage collection system was the City’s best hope for digging itself out of its financial hole.
Does this mean the City has sold only the wastewater treatment plant?
No. The collection system, which is the network of pipelines transporting sewage from homes and businesses in the City to the treatment plants, consists of very old and outdated pipes. About 86% of the pipes in the collection system were installed before 1950 and are made from brick and clay, instead of safer and more contemporary materials. The cost of upgrading these facilities would have been burdensome to the City to undertake without the financial resources and economies of scale available to a larger wastewater facility operator.
Background on the Pennsylvania American Water Company Proposal
How significant is the Pennsylvania American Water Company bid for York City’s wastewater treatment system?
The company’s bid for York’s wastewater treatment system ranked as one of the largest acquisitions in the history of the company, surpassing the $195 million purchase of Scranton’s wastewater treatment system and the $159 million purchase of McKeesport’s system. It is a significant financial commitment to the City of York and an economic signal that the York region is a smart investment with tremendous growth potential. Ultimately, $253.3 million was realized by the City.
How are the proceeds from the sale being used?
The proposal included an upfront payment that covered the City’s 2021 budget deficit and prevented massive tax and fee hikes. This sale also allowed the City to pay off all its debts related to the York City Sewer Authority and certain of its municipal bond obligations and to stabilize and properly finance employee pension and other post-employment obligations. This allowed the City to be free of much of its legacy costs, with the ability to shape its financial future.
Potential Impact on Sewer Rates & Customer Service
What happens to sewer rates now that the system is sold to Pennsylvania American Water Company?
Pennsylvania American Water Company’s proposal included a three-year rate freeze for all direct-service customers. This means the company would adopt the rates then paid by customers in the City of York, and those rates would not change for at least three years. After three years, Pennsylvania American Water Company may propose rate increases, but any rate increase would be effective only upon review and approval by the Pennsylvania Utility Commission (PUC).
PUC rules and regulations require that any rate increase be publicly noticed to all customers as well as statutory advocates such as the Pennsylvania Office of Consumer Advocate, the Pennsylvania Office of Small Business Advocate, and the PUC’s Bureau of Investigation and Enforcement. Each of these entities will actively review any rate increases proposed by Pennsylvania American Water to protect customers from unreasonable or unsupported rate increases.
Additionally, direct-service customers of Pennsylvania American Water Company are eligible for the company’s discount program for low-income customers.
Click Here for English Click Here for SpanishDon’t these private utility companies seek profit for shareholders? Why should the City have sold the system so another entity can profit from it?
It is true that private companies have a profit motive and public utility operators do not. However, private companies operating utility systems are regulated by the state to ensure that rates charged recover only the actual cost of service plus a reasonable (meaning not excessive) return on investment which contributes to the overall profit. In return, the City’s customers will benefit from improved training for system staff and workers, cutting edge system upgrades, and industry-leading environmental and sustainability initiatives, as well as long-term tax savings from revenue generated by the sale.
Can Pennsylvania American Water Company hold customers served by the City’s system responsible for the full costs of serving the system?
No. Pennsylvania American Water Company can spread the cost of infrastructure upgrades across more than 2 million water and sewer customers throughout 400 municipalities statewide. As a regulated utility, it is specifically permitted to prevent rate shock for individual customers across the system.
How does the sale affect residents’ customer service?
Pennsylvania American Water Company agreed to maintain physical customer service office within the City of York and offers 24-hour support through telephone and online resources.
More InformationPublic Health and Safety
Since the system is sold, does the Pennsylvania Department of Environmental Protection (DEP) and the U.S. Environmental Protection Agency (EPA) continue to have jurisdiction over the City system?
Yes. The state DEP and federal EPA continue to have jurisdiction over the City system.
Who controls service quality now?
Pennsylvania DEP and U.S. EPA continue to provide oversight over environmental compliance. The PUC oversees and regulates service issues such as billing and customer service.
Who assumes the risk if unexpected system or environmental problems arise?
Pennsylvania America Water does. Also, Pennsylvania American Water has the continuing responsibility to ensure the City system continues to adhere to all state and federal regulatory and environmental requirements.
We know upgrades are needed to the aging wastewater collection system. Will this sale finally bring our system up to modern standards?
Yes. Pennsylvania American Water Company will invest millions of dollars to modernize and upgrade the York system to ensure safe and reliable wastewater treatment services to the community for generations to come. Pennsylvania American Water Company has a proven track record as a customer-centered and community-focused company with a deep commitment to corporate and environmental responsibility. From McKeesport to Scranton, Fairview Township to Steelton – Pennsylvania American Water Company brough financial stability to the communities it serves while also increasing reliability of wastewater treatment services.
Impact to Employees
What of the City’s employees that worked at the old system?
The City cares about its workers that were affected by the system sale and took steps to protect them to ensure the impact would be minimal. For instance, the City included as a condition of the sale that all current employees in good standing be offered similar positions with the new owner and the new owner would be required to recognize the union representing those employees. The buyer was also required to adopt the City’s collective bargaining agreement for the sewer employees. Pennsylvania American Water agreed to these conditions.
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