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How A Sale Is Conceived And Executed

Pennsylvania is a hotbed of acquisition activity by the Big Water companies.  Since Act 12 passed in 2016, 33 deals are proposed, in progress or completed.  This many deals do not just happen independently, it is likely there is a lot going on that is never seen.  We will start with how these things get started – the deal incubation process. 

How It Starts – The Public Version

The first indication that something is going on is usually found in the agenda or minutes of a meeting for a municipal Board of Supervisors or a municipal water/sewer authority.  It could be a low key entry in the meeting minutes something like: “Forming a sewer system study committee”. 

Municipal board meetings are generally very low profile.  The vast majority of citizens pay no attention to them at all.  For water or sewer customers that can be a big mistake.  Clearly, in our New Garden Township it was a huge mistake.

How It Starts – A Likely Behind The Scenes Version

What never seems to be discussed is where the idea of selling a water or sewer system came from.  Did some official just get the idea and say, “Hey let’s consider selling our system”.  Or, did somebody from Big Water start contacting one or more officials with a “have we got a deal for you” offer. 

We believe that most sale evaluations start because of Big Water contacts with municipal officials.  In Pennsylvania alone since 2016 there have been at least 33 deals completed, in progress or proposed.  Is it likely that 33 different municipalities acted independently?  

 

Municipal acquisition is a major growth strategy for both American Water and Essential Utilities (LINK).  With the guaranteed profits that result from an acquisition, it is highly likely Big Water is actively recruiting target acquisitions.  And, they target well run systems.  The type of systems that add the most to profits.

How It Starts – A Top Secret Version

A recent deal has caused us to add this "Top Secret" category.

On July 24, 2023 the East Dunkard Water Authority (EDWA) announced it had signed a deal to sell itself to Pennsylvania American Water for $5 million.  EDWA’s board has met 27 times in the last year.  Just once did their meeting minutes mention selling the system.  That was on June 29, 2023 (LINK).  And, it authorized some official to go sign the sale papers. That was it!  Deal done!

The Pennsylvania American press release (LINK) states that the negotiation process had been going on for nine months.  And, the first we hear about it is the signing of the deal.  That sure sounds like a “Top Secret” process to us. 

Flying Below The Radar

Once an effort to sell a water or sewer utility is underway, things normally remain low profile for months or even years.  This is the deal forming stage.  There seldom is any information with detail or substance.  There may be a webpage devoted to evaluation.  Most likely it will focus on municipal benefits of the sale and what a thorough job they are doing.  Often board meeting minutes may have brief comments like:

  •   Engaging consultants

  •   Considering options

  •    Preparing a request for proposals

  •    Waiting on proposals

  •    Evaluating proposals

 

Finally, there is an announcement of the proposed sale.  And then, things begin to happen quickly. 

The Rush To The Altar

As noted above, the deal may have been many months or even years in the making, but suddenly speed seems to be critical.  Usually a public meeting is scheduled quickly.  That meeting also generally follows a pattern:

  • There is a slick presentation with all the reasons to sell.  Normally, it is not available until you arrive at the meeting and have no opportunity to analyze it.

  • The “winner” of the bidding process might be there and make a presentation about how wonderful they are. 

  • Individuals are allowed to make statements or ask questions – usually, with strict time limits.

  • There is NEVER the opportunity for organized debate/discussion/dialog among proponents and opponents of the deal.  The whole process is designed to squelch any organized opposition. 

Even when there is strong or nearly unanimous opposition to the sale, the public officials remain dedicated to the deal.  The officials talk about listening to public input, but never seem to change their position based on that input.

Sometimes there may be a second or even third public meeting.  But, generally the appropriate municipal officials move quickly to hold a vote to approve the sale. 

Conclusions

The public announcement and subsequent public meeting makes one thing very clear:  A lot of planning and work has gone into the proposed deal.  Responsible municipal officials should have been holding a number of public meetings to educate their constituents about the progress of the process – real dialog sessions.  We have yet to see that happen. 

What we have seen is that the municipal officials are totally dedicated to selling the proposal.  Sometimes there is a dissenter, but the majority are gung‑ho for the sale.  If the sale is being driven for the wrong reasons, speed is especially important.  The longer the public has to really learn about the dodgy aspects of the deal, the stronger the opposition to the deal. 

Another common theme is that the focus is on all the wonderful things the sale proceeds will do for the community.  But, that is never compared to the cost to the ratepayers. 

There Can Be A Bright Side

There have been cases where mass public opposition has stopped a proposed sale.  Examples in Pennsylvania include:

 

  •     Norristown

  •     Conshohocken

  •     Willistown

  •    Tredyffrin

  •     Bucks County

  •     Newberry

Organizing opposition can produce results.  It takes work and dedication, but it can save you and other ratepayers a lot of money.

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