When Mayor Bill Peduto took office in 2014, he was suspicious of how the Pittsburgh Water and Sewer Authority had been run.
In 2007 and 2008, PWSA had made two bond deals right before the financial crisis that ended up costing the authority tens of millions dollars, even as well connected local financial advisers made millions in fees. Peduto said he’d asked a lot of questions on council about the deal but never got any real answers.
Then in 2009, the authority made all PWSA customers opt in, by default, to a $5 per month insurance plan for water line breaks at their homes. It turned out later that the authority’s executive director at the time, Michael Kenney, had ties to the private company receiving the money that he didn’t disclose. The company paid for his membership to the Ligonier Country Club, and leaders at the time were upset that Kenney didn’t disclose this and other ties before awarding the company the contract. Kenney was pressured to resign, and an independent investigation found ethical lapses but no criminal wrongdoing.
“That’s the kind of corruption we were dealing with when we came in. It wasn’t just cousin Jimmy filling the potholes. That existed, too. It was all the way to the top floors of the highest skyscrapers Downtown,” Peduto said.
When Peduto took over in 2014, he replaced the entire PWSA board, except for Margaret Lanier, who continued to serve on the board as the city’s treasurer. (Lanier, who retired earlier this year, was the only board member appointed by Peduto who declined to speak for this series.) Peduto wanted professionals rather than politicians on the board, he said. But that meant PWSA didn’t have a board at all for most of the winter of 2014. When the board finally was put in place in the spring, it took a year to learn the basics of the business.
“Unless you understand how to filter and deliver water and how to do all of the things that a company like this does, you are on a very big learning curve,” said Andrea Geraghty, a real estate lawyer on the board from 2014 to 2017. “So we spent a tremendous amount of time just learning about operations and the finances of the organization.”
It wasn’t because there was a total lack of experience. Caren Glotfelty had been the state’s deputy secretary of water resources. The board included financial professionals, real estate and legal experts. And by statute, a city councilperson, Deborah Gross, took over for Patrick Dowd, the previous city councilor on the board.
At first, Glotfelty thought highly of Veolia Water North America because Dowd had been such a big supporter of bringing them on board. Veolia gave out thick packets of information to board members about what they were doing and held trainings on different aspects of PWSA’s work.
And PWSA under Veolia’s leadership wasn’t acting like it was near a crisis. The staff told Peduto during his first budget negotiations that their top priority was funding for a new headquarters on the South Side, he said.
Hints of problems
Soon after, there were hints of the problems to come. City Councilwoman Theresa Kail-Smith was hearing from residents in her district about billing problems at PWSA. It would turn out later that the billing problems came in waves, as different parts of PWSA’s metering and billing system failed over time, Gross said. Kail-Smith’s district had been the first to get hit.Gross wasn’t hearing complaints from her neighborhood yet, but she soon would.
Veolia had undertaken an effort to replace the water meters in the city. Instead of having a worker go out to look at each meter, PWSA could save money by electronically transmitting the information back to its billing department. It was the kind of modernization effort that was long overdue. It was also the kind of problem Veolia had every incentive to take on: their contract stipulated that 50% of the savings would end up in their pockets.
But problems emerged at each step.
Before Veolia, PWSA implemented a new billing system but the system had compatibility issues with the old system. Then a contractor, hired under Veolia’s leadership to install the meters, made mistakes and some of the meters had to be reinstalled by PWSA employees. And even when they worked, sometimes the wrong “multiplier” had been used, showing much more water usage than was possible.
Veolia hadn’t fully vetted whether its new metering technology was compatible with PWSA’s billing software. The software had to be rewritten and adapted. So homes with new meters didn’t work with the old system, until the system switched over. Then in September, when the new system came online, all the homes with old meters stopped working. PWSA’s staff was overwhelmed, and the issues piled up.
When customers called, they were put on hold for so long that they often hung up before they could get their issues addressed. The board thought the customer service person they hired was very competent, Glotfelty said, but she clashed with Veolia’s leadership. “It was just a mess,” she said.
Board members said they became frustrated that the problems with billing and customer service didn’t seem to be improving much as problems were still flaring up in 2015. But Veolia held six of the top management positions at PWSA, and there wasn’t an easy way to get rid of them and still keep the organization running. The board began hiring for the top six positions at PWSA, board member Paul Leger said, which caused its own problems. Sometimes the new leaders clashed with Veolia’s executive director because they thought being hired by the board gave extra independence.
All the crises at once
By 2015, the city’s lead levels had been rising for 15 years, according to data submitted to the U.S. Environmental Protection Agency, but the issue hadn’t received much attention. The danger of having lead in the drinking water hadn’t historically been a major area of public concern. A 2007 study of the region’s water quality at the University of Pittsburgh mentioned the possibility of testing for metals like lead in the rivers but didn’t address the risks posed from lead in the pipes where problems eventually emerged. PWSA’s board members didn’t know it was a problem they should be looking out for, several said.
But local reporters in Flint, Michigan, uncovered a massive contamination problem that had been mismanaged and covered up. Lead poisoning can cause learning disabilities and delayed development, and leaders in the city and state seemed indifferent to struggles of Flint’s predominantly low-income and Black residents who were forced to drink bottled water. Suddenly lead contamination was one of the biggest environmental stories in the country. In January 2016, Michigan declared a state of emergency.
That was the same month that Leger read an article in the Pittsburgh Post-Gazette about the city’s rising lead levels before a board meeting. He passed around the article on his phone to his board colleagues. There were gasps, said Leger, who had been serving on the board for nearly two years by that point.
Jim Good, the executive director at the time, told the board not to worry because the lead level was under the EPA’s limits. Good had been running PWSA as an employee of Veolia, a private firm, for three years and then was hired on full time by the board in May 2015.
Good had not been the board’s first choice. The board had found a strong candidate who turned PWSA down because the pay wasn’t competitive, and he didn’t want to have to live in the city as required.
“People aren’t in danger. The lead levels are very low,” Good told the press at the time. “The drinking water regulations are written with very large safety barriers in mind.”
The board didn’t trust him any longer, several board members said. PWSA quickly moved to get rid of Good. But the problems just continued to snowball.
“We would have these meetings where we would leave in worse shape. We would find two or three more horrible things that had gone wrong,” Leger said. “We couldn’t even get a bill right. We had no IT system.”
Some of these problems put the entire city at risk, Leger said. “Unbelievably, there was no security operation,” he said. “This was a public drinking water system, and anyone could walk into that water plant.”
Many of these problems were longstanding problems at PWSA. “Looking back now, I suspect that there were just too many overlapping issues, and it simply took the time it took to work through those issues,” said Geraghty.
Veolia did make some progress on key areas. Between 2012 and 2015, for example, Veolia had built up a stormwater program and brought in a consultant to develop a long-term plan to rebuild PWSA’s infrastructure.
But during most of the Ravenstahl administration and Peduto’s first two years in office, PWSA barely raised its rates, and there wasn’t enough money for PWSA to get ahead of the problems. The direction given by the city, spelled out in Veolia’s contract, was to focus on short-term improvements at as low a cost as possible. So instead of saving PWSA, things continued as they had been for too long: they fixed things as they broke and kept the authority afloat. Until even that stopped working.
“What we inherited was a system that was not only broken but beyond broken — unable to pay its own bills — let alone fix its problems,” Peduto said.
Lead contamination was the biggest threat in the public’s mind and, because Veolia’s leadership was in charge as the crisis emerged, Veolia became a public punching bag of the mayor, city leaders, environmentalists and just about everyone who weighed in. (Veolia was blamed in Flint by city leaders, too, though it had a very small role in that crisis.)
To this day, many PWSA employees still speak bitterly about how Veolia gutted the authority. The company had earned more than $10 million in profits while the agency was failing publicly like never before. It seemed to be a classic case of a greedy corporate entity coming in to loot a public entity for the good of its shareholders. And to boot, their greed ended up poisoning the water supply.
There’s one problem to the ending of this story — the last part probably isn’t true.
Read the next story in this series: “Part 5 — The lead crisis in retrospect: the main problem wasn’t corporate management”
Explore more stories in this series: “A water crisis swept through Pittsburgh five years ago: This is the fullest account of what happened.”
Oliver Morrison is PublicSource’s environment and health reporter. He can be reached at email@example.com or on Twitter @ORMorrison.
This story was fact–checked by Matt Maielli.
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