Philadelphia Gas Commission staff, mayor head for clash over fees associated with PGW sale

Mayor Nutter wants to spend $2.7 million on advisers to explore selling PGW.
Mayor Nutter wants to spend $2.7 million on advisers to explore selling PGW. (ALEJANDRO A. ALVAREZ / Staff Photographer)
Posted: January 17, 2013

The Philadelphia Gas Commission is heading to a showdown Wednesday over Mayor Nutter's desire to pay $2.7 million to advisers on a possible sale of Philadelphia Gas Works.

The gas commission's professional staff recommended last month that most of the city's request for fees for lawyers and financial advisers was reasonable.

But the staff - Janet Parrish, the executive director, and Tarleton D. Williams, a hearing examiner - recommended that the gas commission reject Nutter's request to spend $201,000 for media-relations advisers and $200,000 for lobbyists to sell the privatization to the public and City Council.

The reasonableness of the fees - and whether PGW or the city administration should pay them - has become a proxy for the wisdom of Nutter's effort to explore a sale of the 176-year-old city-owned utility.

The gas workers' union and the city's public advocate, Community Legal Services, are skeptical that a sale of the utility to private owners would benefit customers. They argue that PGW and its customers should not pay any advisers' costs.

The commission staff said the questions raised by the union and the public advocate were speculative. They said the budget review about adviser costs "is not about the merits of a potential sale of PGW."

The staff said that the $750,000 fee for the financial adviser, Lazard Freres & Co., was reasonable and that hiring legal advisers also was within the bounds.

But the staff questioned the hiring of a team of public-relations consultants headed by Ceisler Media and a government-relations law firm, Kleinbard Bell & Brecker L.L.P. They said PGW had never previously paid for media consultants and lobbyists.

The fee issue puts the gas commission in an awkward position. The panel is ostensibly an independent body with oversight responsibility for PGW's budget. But City Solicitor Shelley R. Smith serves as the commission's legal counsel and has recommended that the fees are prudent and reasonable expenditures. If the commission refused to pay the fees, it might appear to be thumbing its nose at the mayor's office.

The disagreement could split the commission, whose five members include two Council members, Marian B. 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. He has recused himself from voting on the Kleinbard contract because his son is an associate at the law firm.

The Nutter administration moved forward with the sale process after the city's financial adviser estimated that a sale could net the city as much as $496 million after PGW's liabilities of about $1.3 billion were paid off.

Next week, said Nutter spokesman Mark McDonald, the city will interview brokers who would manage the bidding process, which advocates of a sale hope will generate bids that will settle the question of whether the city government - and ratepayers - stand to gain much by divesting the utility.

"I would say in a nutshell we're moving full speed ahead," McDonald said.


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

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