Authorization has been given for Johnstown Mayor Frank Janakovic and interim City Manager John Trant Jr. to act on behalf of the city in any negotiations for the sale of the municipality’s sewer collection system.
All seven City Council members – Janakovic, Deputy Mayor Marie Mock, Ricky Britt, the Rev. Sylvia King, Michael Capriotti, Dave Vitovich and Charles Arnone – approved the motion during a regular monthly meeting on Wednesday.
Council has been considering selling the system – and other assets – as a way to stabilize finances as the city prepares to exit Pennsylvania’s Act 47 program for distressed municipalities by Oct. 28, 2021. Talks have been held with multiple potential buyers, including, most recently, the Greater Johnstown Water Authority.
“We’re looking at the best deal we can get financially for the city and, in addition to that, what’s going to protect our citizens from any future rate increases, those sorts of things,” Janakovic said. “So it’s a twofold mission that we’re looking at. But this mayor and council has also been handed a $25 million pension deficit, a $10 million bond issue that we are responsible for. This is not to look at other councils previously, etcetera, but we’re now the ones with that task and a $120 million sewage project.”
Any agreement would need to be put forth at a public hearing, approved by the full council and the state, according to Elizabeth Benjamin, the city’s solicitor.
Janakovic and Trant have been working with department heads, Act 47 advisers and legal representatives during the process so far.
“The city has a great team assembled,” Trant said. “We have a lot of confidence in lawyers and engineers. The Act 47 team are helping out.
“We’ve got a really good team assembled honestly. It’s very encouraging. We’ve got the right people in place to help get the best deal for the city.”
As part of the arrangement, the city would be looking to have the buyer assume the debt incurred as part of the ongoing, state-mandated sewer remediation project to reduce flows into the Johnstown Redevelopment Authority’s Dornick Point Sewage Treatment Plant that needs to be completed by Dec. 31, 2022.
Money raised could help pay off debt and pension obligations.
But that infusion of cash would come at the cost of losing a long-term revenue stream.
The city would also need to find an organization with the capability of running the infrastructure asset for decades to come. Michael Kerr, the GJWA’s resident manager, thinks the authority can fulfill the requirements if a deal is reached.
“We want to purchase it because our intention is to stabilize the rates and to not unduly raise the rates on anybody in the City of Johnstown,” Kerr said during a telephone interview after the meeting.
“We have the professional staff, equipment and expertise at the water authority to do the job of the maintenance and operation of the system.”
In order to make the authority eligible to potentially purchase the city’s system, the three municipalities that own the GJWA needed to amend the organization’s charter to permit operating a municipal sewer service. Westmont Borough and Southmont Borough previously approved the change. Johns-town City Council gave its go-ahead – with a 7-0 vote to a separate resolution – on Wednesday.
Kerr expects the language to be finalized within the next two weeks.
The resolution also called for extending the existence of the authority for 50 years from the date of the approval of the amendment by the commonwealth.
“It is a public asset, and the interest is in reinvesting the revenues that are generated into the system and the embedded assets that comprise the system,” Kerr said. “The return is expectedly lower on a public asset because we’re not looking to make money. We’re looking to properly manage and operate the system and replace the system as needed within that 50 years.”
Any purchase would also involve long-term financing for any buyer.
“When they purchase the bonds, they do go out 30, 40 years, so they do need the duration or the time to get these bonds purchased,” Mock said.