Advisers' fees in potential sale of Philadelphia Gas Works divide gas commission, mayor

Posted: December 13, 2012

The Philadelphia Gas Commission and the Nutter administration appear to be on a collision course over the mayor's desire to pay $2.7 million to advisers for a possible sale of Philadelphia Gas Works.

The gas commission, which controls the city-owned utility's purse strings, struggled Tuesday with Nutter's request to force PGW to pay the fees rather than tapping into the city treasury.

The city's public advocate and the gas workers' union told the commission on Tuesday it would be improper for the utility to pay the fees because it's uncertain whether PGW customers would derive any benefit if the utility were privatized.

"These advisers serve the city administration, and the city administration alone," Robert W. Ballenger, the Community Legal Services lawyer who serves as public advocate. The fees would pay for financial, legal, and communications advisers.

City Solicitor Shelley R. Smith, who also serves as the lawyer for PGW and the gas commission, has issued an opinion that the advisers' fees are legal. She told the panel Tuesday the fee budget was "reasonable and prudent under any legal standard of review."

But Janet Parrish, the commission's executive director, has raised a host of questions about the propriety of the fees. Without actual bids on the table, she said, it's impossible to speculate about what value a sale would bring to PGW customers.

The city's financial adviser estimates a sale could net the city as much as $496 million after PGW's liabilities of about $1.3 billion were paid off.

Councilwoman Marian B. Tasco, the commission's chairwoman, asked the solicitor Tuesday what would happen if the panel rejected the fees.

"I was hoping we won't get to that point," said Smith, who added, "we will cross that bridge when we get to it."

The disagreement could split the commission, whose five members include two Council members, Tasco and Curtis Jones Jr., and two mayoral appointees, Carmen E. Adames, an accountant and tax adviser; and Royal E. Brown, an Independence Blue Cross executive. The fifth member is City Controller Alan L. Butkovitz, who is running for reelection next year.

In a letter to the commission Tuesday, Butkovitz recused himself from voting on one of the more controversial contracts, a $200,000 agreement with Kleinbard Bell & Brecker L.L.P., because his son Edward is an associate at the law firm. Kleinbard would lobby Council members on the sale process.

Tasco on Tuesday also took umbrage at statements by mayoral spokesman Mark McDonald on Sunday in The Inquirer that blamed the slow process of approving the contracts on "a bunch of vested interests throwing up obscure roadblocks."

Tasco said the Nutter administration, not the gas commission, was responsible for the protracted process.

"We waited for four to five months for the city to provide us with the documents we requested," she said, and then the commission "moved rapidly" to review the material.

"So I guess what I want to say is, one man's so-called delay and obscure roadblocks are this woman's due diligence," she said.

The gas commission may vote on the fee issue in January.


Contact Andrew Maykuth at 215-854-2947, amaykuth@phillynews.com, or follow @Maykuth on Twitter.

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