As PWSA went into crisis in 2016, the Allegheny Conference on Community Development had a meeting to identify opportunities and threats to the Pittsburgh region. There, Morgan O’Brien, the president and chief executive of Peoples Natural Gas Company at the time, heard a presentation about Flint, Michigan, and the threat lead poisoning posed locally.
“Oh my god,” he remembers thinking. “If that happens here, all the CMU and high-tech things and UPMC with life sciences, we’re sunk as a region.”
At the time, Peoples was beginning work on a 20-year revitalization of its underground gas pipes. When he visited workers who were tearing up the streets once, he saw another pipe directly below the gas lines and asked what it was. It’s the water line, they told him. It would be more efficient to replace all the lines at once, he thought to himself.
Then, the new financial head at PWSA asked to meet with O’Brien to learn about Peoples’ billing and accounting system. O’Brien thought about how Peoples could run PWSA’s billing system as well and save PWSA money.
It’s at that point that he went to Mayor Bill Peduto, whose support he knew he would need, and mentioned the potential for the savings. O’Brien lives in Pittsburgh and raised his children in the city. He was a well-respected leader in the utility business for decades and had been involved in a number of efforts to help with economic development in the region at the Allegheny Conference.
“If I sold you water, I wouldn’t be a bad person all of a sudden. I would still care about the community,” O’Brien said. “So [Peduto] said, ‘Why don’t you propose this idea publicly, take it out and see how people react to it?’”
Public perception of private
O’Brien had just made another decision that would make his pitch for PWSA more difficult: He’d hired Kevin Acklin, Peduto’s chief of staff, as his general counsel. Acklin had worked closely with O’Brien when he was the CEO of Duquesne Light and Acklin was a private practice lawyer. Acklin had been deeply involved with trying to fix the PWSA problems from his city post and was inspired by O’Brien’s vision for how to help.
O’Brien said he knew hiring Acklin would be a public perception problem but hired him anyway because he thought he was the best person for the company’s core business — natural gas. “Right away it became a negative to it because publicly everybody saw, ‘Alright, he’s trying to get in the henhouse,’” O’Brien said.
Acklin helped develop an additional element to Peoples’ proposal: a new water treatment facility to replace the one in Aspinwall that was falling into disrepair. After Peoples’ proposal went public, O’Brien said he heard from around a dozen small municipal water systems in Allegheny County that were facing their own financial challenges and were interested in buying water from a new plant. Those same municipalities would not buy water from PWSA, which already had the capacity to produce tens of millions of gallons of additional drinking water, they told him. Their perception was that PWSA was dysfunctional and its water unsafe.
Peoples produced advertisements and videos. And O’Brien met with everyone he could, including city councilors, PWSA staff and local officials. When activists from the Our Water Campaign protested outside his office, he said, he invited them in and gave them a presentation on how he thought Peoples could help turn around PWSA. The protesters didn’t ask many questions, so O’Brien gave out his business card with his cellphone number on it and told them to call him if they had any further ideas or questions.
Nobody ever called, O’Brien said, but they did continue to protest.
In O’Brien’s view, the city had become influenced by protesters who believed in public ownership on principle.
Many of the protesters at the time didn’t understand why the city would turn to a private company for help when city leaders had just told them that Veolia Water North America, a private company, was the biggest reason PWSA was in crisis.
“For real, it’s like a slap in the face that we already allowed a private company to destroy our water and now we’re paying for it to be fixed and now you want us to let another private company do the same thing,” said Billie Vaughn, during the protest outside Peoples’ headquarters. “We’re a little traumatized.”
Peduto’s view on privatization
The Allegheny Conference on Community Development, whose board O’Brien chaired in 2013, was unequivocal about its position to Peduto’s Blue Ribbon panel. The conference has representatives from nearly every major business, nonprofit and foundation in the region, and its leadership made clear to Peduto and other leaders that PWSA would be better served by the efficiencies that could only come from private ownership.
“In recent years, decades of unchecked governance issues at PWSA came to light, exposing ineffective leadership, serious oversights and neglect,” Stefani Pashman, its CEO, wrote in a recent statement to PublicSource about the concerns the conference had at the time. “Collectively, these compromised the delivery of safe, quality drinking water and put the region’s reputation in jeopardy.”
In 2017, Peduto said that Pennsylvania American Water, the private company that provided drinking water to the South Hills neighborhoods, had been more accountable to the public than PWSA. American Water had higher rates, which were subsidized in part by millions of PWSA’s funds, due to a 1972 agreement to lower the water bills of South Hills customers. South Hills city councilors had fought off attempts to take away the subsidy for decades. So American Water had more revenue to invest in its infrastructure and was having fewer breakdowns.
Peduto believed that PWSA’s rates would have to soar if it didn’t find a private partner to help with the work he said was needed to fix PWSA. When he released the details of Pittsburgh’s bid for Amazon’s second corporate headquarters, he mentioned that the extra tax revenue from Amazon could support some of the badly needed improvements at PWSA.
If PWSA didn’t get an infusion and its debts became greater than its assets, Peduto worried that Republicans in Harrisburg would make a push for full private ownership. He said he never wanted that and made it clear to Peoples at every step of the way that full ownership was not an option.
Peduto’s openness to private management of PWSA’s biggest assets worried residents and activists, who felt that a private company would eventually charge higher rates. They worried a private company would also do less to address issues like flooding or helping low-income customers if it didn’t help their bottom line.
The Our Water campaign had a different definition of what constituted public, according to Aly Shaw, from Pittsburgh United. She remembers sitting down with Dan Gilman, Peduto’s chief of staff, and showing him a chart that explained that they thought privatization included either ownership or management. “We don’t think it starts there,” she remembers Gilman saying, indicating that the mayor was open to a long-term management deal.
“Do you privatize the water? No, no,” Peduto told PublicSource recently. “But you hire a company that will charge you a certain amount of money to build it and then you pay them off over the course of 40 years in order to have a state-of-the-art system. That’s a public-private partnership without privatizing anything other than your payment.”
Peduto said he probably met with O’Brien about the Peoples proposal four to six times. Each time, he said, O’Brien would come back with a new idea that he thought Peduto would like. But the numbers never added up, Peduto said. O’Brien needed some kind of ownership or long-term lease to draw investors into PWSA, Peduto said. Peduto was open to a long-term lease deal, he said, but the financing proposals Peoples put together weren’t acceptable.
Our Water Campaign protesters filled up the city council meeting when it considered voting to allow O’Brien to make a presentation. The council members who had seemed supportive in private meetings, O’Brien said, suddenly wouldn’t even vote to allow him to make his pitch at all. And when the Our Water Campaign eventually asked Peduto to sign a pledge to keep PWSA fully public by the campaign’s own definition, he signed it.
Peduto had left the decision of what to do with PWSA up to his Blue Ribbon panel. It was clear that privatization would never pass city council, said Jared Cohon, the former Carnegie Mellon president who served on the panel. Yet the panel didn’t shut down the possibility on the merits and deliberately left that possibility open in the future.
The Peoples Gas proposal was never the point, Peduto said. What he wanted was an open international competition where dozens of firms across the world like Peoples could make their pitch for how to turn PWSA around.
In retrospect, Peduto said he thinks many of the people opposed to a lease agreement with a private company hadn’t shown the same interest in the agency during decades of public mismanagement. “They were saying the public should run it when for 30 years the public couldn’t run it,” he said. “There was never a light shone on it. Nobody cared.”
PWSA’s board, executive director and staff had been opposed to privatization and said they often heard about what was happening in the press. Board members doubted some of the claims that there would be any benefit by having Peoples replace water lines and gas lines at the same time. And the engineering staff at PWSA never fully understood how the People’s proposal to build entirely new infrastructure could ever be cheaper, given that the existing infrastructure would have to be maintained in the meantime.
O’Brien said PWSA board and staff members looked at him in meetings like an adversary. “They felt like they could fix it and didn’t want somebody else coming in and doing it,” he said.
PWSA was quietly making the strongest argument against privatization yet: It was beginning to show that it had the capacity to fix its own problems.
The PWSA board member who wants to abolish PWSA
Deborah Gross, who served on PWSA’s board for six years and continues to serve as a city council member, doesn’t want PWSA to exist as a separate entity at all. She thinks it should become a department of the city again.
When residents started complaining about their PWSA bills in 2014, it was the city councilors who started hearing about it first. It was more of an abstraction to her colleagues on PWSA’s board.
“It took a while for my fellow board members, because they don’t interface with citizens directly, to really trust what the people were saying and not what Veolia was telling them, at all levels,” she said.
She once forwarded hundreds of emailed complaints to her colleagues to get them to understand the gravity of PWSA’s problem. Another time, Gross hijacked a press conference and promised that the city would provide residents with water filters before asking anyone’s permission. She wanted something to be done immediately for her constituents.
County Controller Chelsa Wagner refers to authorities like PWSA as “shadow governments” that, in practice, end up serving as tools for the mayor or county executive.
“This shadow government is a way for elected leaders to skirt accountability for rate increases,” she said.
The studies that came out during PWSA’s crisis recommended greater political independence — the opposite of what Gross and Wagner want. The thought was PWSA’s board needed more independence to prevent politicians from calling in favors and keeping rates artificially low to win elections.
Gross, who was replaced on the PWSA board last year against her will by Peduto, rejects this theory. She said she thinks there are too many separate boards for the public to pay close enough attention to them all and provide real accountability. Instead, she wants the city’s water to come back under city control, as it had been before 1995.
“I don’t think more independence means better. That is a pro-privatization perspective to say that more independence is somehow more efficient and smarter,” she said. “Veolia was not more efficient and smarter.”
Read the next story in this series: “Part 9 — PWSA’s turnaround begins: Bob Weimar starts to ‘get shit done’”
Explore more stories in this series: “A water crisis swept through Pittsburgh five years ago: This is the fullest account of what happened.”
Oliver Morrison is PublicSource’s environment and health reporter. He can be reached at oliver@publicsource.org or on Twitter @ORMorrison.
This story was fact–checked by Matt Maielli.
