PhillyDeals: Proclaiming financial liberty for the city

With a little smeltering, we could fix that crack and ring up some profits.
With a little smeltering, we could fix that crack and ring up some profits. (TOM GRALISH / Staff Photographer)
Posted: July 31, 2011

The City of Philadelphia, with more retired ex-employees than active workers, struggles to fund their future pensions. The need to ease a multibillion-dollar budget shortfall threatens higher taxes, and leaves less for today's city needs.

So Mayor Nutter and two would-be mayors, Councilman Bill Green and Sam Katz, the state oversight board chairman, have revived suggestions that Philly try a garage sale - of stuff the city has accumulated.

It's complicated. Wall Street investors and private utilities love to buy public assets, especially water systems. "The biggest obstacle [is] political," says Ryan Connors, infrastructure analyst at Janney Montgomery Scott L.L.C. here.

City workers, consumer advocates, and regulators don't like to see investors profit at public expense. Voters in Trenton, so poor it laid off more than 100 police last week, voted against a Water Department sale.

What does our city have to sell?

Philadelphia International Airport. Three years ago Citigroup Inc. and its clients offered $2.5 billion for Chicago's Midway Airport, half the size of Philadelphia's. But that plan stalled, and the Federal Aviation Administration isn't making other deals easy.

Philadelphia Gas Works. PGW was run by UGI Corp. until the 1970s, when Mayor Rizzo took it over, hired a lot of former police officers, and stopped collecting bills. Debt zoomed to more than $1 billion.

Under Mayor Street and Nutter, PGW boss Craig White's team boosted collections to more than 98 percent; debt is down.

What's a gas works worth? UGI paid $580 million for utilities serving 150,000 customers in Scranton-Wilkes-Barre five years ago, and $268 million for systems with 75,000 customers in 2008. The Philadelphia system has 500,000 customers.

But it's tough to compare, warns UGI chief executive officer Lon Greenberg. PGW "has done an excellent job improving," he told me. It still has about $800 million in debt. UGI would be interested in returning, if it could make a regulator-approved profit that investors would like.

Philadelphia Water Department. Private water operator Aqua America Inc., of Bryn Mawr, recently agreed to pay $120 million for systems serving 51,000 Ohio customers.

Philadelphia's system is 10 times that size. But that doesn't mean it would get 10 times the price. "There's little equity" for investors, says department spokeswoman Joanne Dahme: Plants and pipes are worth $1.8 billion, but the system's debt is almost as much.

"They could lease the assets for 50 or 99 years and receive up-front fees," suggested Gerry Sweeney, water analyst at Boenning & Scattergood Inc., West Conshohocken. But "rates will need to increase," Sweeney added.

The city treats more water than residents use, and already sells some of the surplus to Aqua America, chief executive Nick DeBenedictis told me.

What else? The Philadelphia Parking Authority rolls in cash, but it is state (and Republican) controlled, so Harrisburg has to approve a deal. The ports and city stadiums are weighed down by debt. Philadelphians resist plans to build in Fairmount Park.

Another idea

Philadelphia owns the Liberty Bell. It used to ring as a pro-unity, antislavery freedom symbol. But it busted, and now the city lets the feds march tourists past it. Like a dead thing.

The Bell That Doesn't Ring shows what's been wrong with Philadelphia since we buried Benjamin Franklin, Congress moved to Washington, Andrew Jackson killed the Bank, the grain exchange lit out for Chicago, and both Smith and Barney left Chestnut Street for Wall Street.

It's time to fix The Bell. "You could gas-weld it," says Doug Morris, whose B&B Foundry in Wissinoming has shaped full-size Liberty Bell copies. "Heat it up. Do some chemistry," Morris said. "Add maybe 20, 30 pounds of iron rods out of the same metal as the casting. You could melt that bell back together. You could ring that bell."

And lease it, license it. Ring the Liberty Bell in Dallas when we beat the Cowboys, in New York against the Mets. Ring it at presidential conventions, and with the orchestra, or local acts on the Piazza at Schmidts, or Race Street Pier. Brand, own, market, control that Liberty image and tone, on iPhones and Androids, everywhere freedom and unity are on demand.

Ring The Bell.


Contact columnist Joseph N. DiStefano at 215-854-5194, JoeD@phillynews.com, or on Twitter @PhillyJoeD.

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