Responding to fears that privatization would wreck havoc with their water system, the city council in Allentown, Pa. voted 6-1 on April 25 to sign a 50-year lease with a regional public authority that will increase city rates by at least 50%.
The mayor’s insistence on selling the distressed city’s utilities apparently convinced the Lehigh Valley Authority (LCA), the city’s largest water customer, that it needed to prevent a private takeover. The result was a dangerously aggressive bid on an onerous contract, says an equity analyst.
“My advice to investors would have been negative if one of the private bidders had won,” he says. “They’d never recover their capital, and the ratepayers are going to take it in the neck.”