Philadelphia Business Journal:City responds to questions about PGW sale
By Mark McDonald, Press Secretary to Mayor Michael Nutter
April 1, 2014
Your recent op-ed by Laura Drexel raised a number of important questions for which answers are already publicly available.
The most glaring error in Drexel’s op-ed is her assertion that the agreement between the city and UIL Holdings Corp. narrowly focuses on a short-term infusion of cash. Yes, the sale will provide cash to take care of all of Philadelphia Gas Works’ obligations. At the same time, the separate payment of at least $420 million into the city’s pension fund will put that fund on a healthier long-term course and free up the city to invest in other services and priorities. Having a severely underfunded pension fund hanging over the city’s head places our financial health at risk.
Drexel is correct when she says Philadelphia is in a particular “sweet spot” to reap the rewards of abundant natural gas supplies. What she fails to point out is that a city-owned PGW, with limits on the amount it can borrow and the strategic partnerships it can establish, does not have access to the capital needed to expand its facilities and take full advantage of the growing liquefied natural gas (LNG) market. The risk of continued city ownership is that if PGW does not make full use of its LNG facility, it will lose out to its competitors — allowing substantial economic activity and family-sustaining jobs to take root outside of the region.
She asks whether the jobs of PGW workers will be preserved. The answer is yes; UIL has guaranteed the jobs for three years, which is a stronger guarantee than those workers now enjoy. She asks whether jobs will grow. If UIL is able to expand PGW’s business opportunities as planned the answer is yes, jobs will be created, not necessarily at PGW but in related industries.
Finally, Drexel raises the concern about PGW’s old cast-iron pipes. PGW currently has a pipe replacement program that is due to take another 88 years to complete. UIL will be better positioned to leverage debt financing and access capital markets, allowing the company to accelerate the pipe replacement program without unduly burdening PGW customers.
City Council’s deliberation over whether to approve the sale should be guided strictly by what best benefits the city’s taxpayers and PGW customers, and that determination can be accomplished through factual answers to all questions.
Answers to the questions raised by the op-ed and many others are available at www.exploringasale.com.
Mark McDonald is press secretary to Philadelphia Mayor Michael Nutter.