Mount Penn votes to create new water authority amid threats of lawsuits | Reading Area

MOUNT PENN, Pa. – Mount Penn Borough Council voted unanimously at a special meeting Wednesday night to adopt a resolution to move forward with a plan to create a new Mount Penn Water Authority.

But the vote was not popular among the approximately 70 residents in attendance, and council heard criticism and threats of litigation during the hour-long public hearing which preceded the vote.

Council approved an ordinance in April to dissolve the current municipal authority, which led to months of negotiations over a proposed leaseback program.

However, those negotiations broke down last month when the current Mount Penn Borough Municipal Authority voted to obtain legal counsel to pursue litigation that might eventually put the matter before a judge to decide who owns the 86-year-old water system.

The borough had proposed a conveyance-leaseback program, a legal process whereby the current authority turns over direct ownership of the system to the borough, which would then lease back the water system to the authority for a 50-year term.

Within the process, there is an agreement against a sale to a public or private entity, a merger of the borough and water staff to form a public works department, and the creation of a revenue stream under the lease to the authority to support emergency services.

One of the problems with the plan, though, is that 69% of the water customers live outside the borough, either in the townships of Lower Alsace and Exeter or in St. Lawrence Borough.

Joan London, solicitor for St. Lawrence, told council that the borough will continue with a plan to litigate the matter.

“It is not the responsibility of outside municipalities to fund the functions of the Borough of Mount Penn,” London said. “St. Lawrence opposes the authority dissolution and the formation of a new authority. It is not in the interest of the public water customers to have lease payments go into the general fund of Mount Penn. The lease payments will support the borough and not the mission of the authority.”

Sidney Kanavins of Fairview Avenue was the only resident to say he supports the conveyance plan.

“All this pushback and litigation from people that want to stop the conveyance may have an end result of a company like American Water salivating,” Kanavins said, “I support the conveyance plan because the water under the control of Mount Penn is delicious.”

North 26th Street resident Patti A. Rose, Lower Alsace Township, said a petition with the signatures of 390 water customers was submitted to the borough on Aug. 25, asking the council to meet with the water authority to finalize a fair and equitable leaseback agreement with a guaranteed “no sales” covenant.

“The authority was formed to maintain a balance of representation between the municipalities and has independently operated as a fully solvent entity,” Rose said. “Water customers pay for the water system. The revenue should be retained to make repair to the infrastructure.”

“Stop and reconsider and make a decision what would best protect residents 50 years from now,” she said. “This isn’t about today’s council but about the people who will be paying the water bills long after everyone in this room is gone.”

John Fielding, a resident of Mount Penn and an attorney, said that as a lawyer he knows what the cost of the litigation will be.

“Seems to me, the prudent way forward is to hold the matter until you negotiate a settlement to the lawsuit before you find yourselves buying more trouble,” Fielding said.

The borough published a statement on its Facebook page, saying it wanted to diffuse all of the false information circulating.

“The Borough’s current direction is to pursue conveyance of the water system, dissolution of the existing Authority, creation of a new public authority, and a leaseback of the publicly owned system to that new authority,” the statement said.

“The water system would remain a public asset,” it continued. “The suggestion that Mount Penn suddenly decided to use the water system because it simply wants money also ignores years of financial planning. Mount Penn participated in the Commonwealth’s Strategic Management Planning process and has been pursuing recommendations intended to address the Borough’s long-term financial sustainability. Council has an obligation to look for sustainable alternatives rather than continually placing additional burdens on Mount Penn taxpayers.”

Several other residents raised concerns about the water system eventually being sold to an outside company.

Thomas Wyatt, special counsel to the borough, said there is not any agreement in place that would prevent the current municipal authority from selling the water system.

“In the lease, there is a contractual agreement that would live through the life of the agreement, protecting the water system from being sold,” Wyatt said.

Wyatt said that the borough and the current municipal authority may still continue negotiations even though the resolution was passed to create the new authority.

Borough Solicitor Thomas Klonis said the next step is to advertise the notice of the ordinance and file the articles of incorporation for a new authority and the adopted resolution with the secretary of the Commonwealth.

“After the issuance of a certificate of incorporation, the (new) authority’s corporate existence will begin,” Klonis said.