Small Borough's Big Lease Provides Lessons for Others
On Dec. 30, 2014, the borough of Middletown in Dauphin County closed on a 50-year lease of its water and sewer system. Pursuant to this public-private partnership, United Water will operate, maintain and manage the system, but Middletown will retain ownership of the assets even after the contract term.
January 19, 2015 at 03:38 PM
8 minute read
Editor's note: Attorneys from McNees Wallace & Nurick represented the borough of Middletown in the matter discussed below.
On Dec. 30, 2014, the borough of Middletown in Dauphin County closed on a 50-year lease of its water and sewer system. Pursuant to this public-private partnership, United Water will operate, maintain and manage the system, but Middletown will retain ownership of the assets even after the contract term. Middletown's lease of the system—often referred to as a “concession” in the industry—is the culmination of a years-long process to fashion a novel solution to the borough's substantial pension shortfall and avoid painful property tax increases or electric rate increases on borough residents. The borough's selection of United as its system operator followed an open bidding process that attracted multiple suitors.
Pursuant to the terms of the lease, Middletown received an up-front payment of $43 million, and will receive substantial annual lease payments thereafter during the lease term. The total aggregate value of the deal is approximately $60 million. Using the up-front payment, the borough resolved not only its pension deficit, but also retired all of its outstanding debt. For the first time in decades, the borough greets a new year debt-free.
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