Pittsburgh City Council looking into water authority contract
March 25, 2010 4:00 AM
Michael Kenney, executive director of the Pittsburgh Water and Sewer Authority.
By Rich Lord Pittsburgh Post-Gazette
Pittsburgh City Council today plans to review a contract that has nearly every city water customer paying $5 a month to a firm with deep ties to the director of the water authority.
Called before council is Michael Kenney, executive director of the Pittsburgh Water and Sewer Authority since April 2008. Council members are concerned about relationships forged in his prior role, as operations manager of the Municipal Authority of Westmoreland County, where he reported to executives of Wilkinsburg-based Resource Development and Management, which runs that authority under a $750,000 a year contract.
RDM paid Mr. Kenney for consulting work when he worked at the Westmoreland County authority. Mr. Kenney later hired RDM to do consulting work when he came to Pittsburgh. And an RDM sister company, Utility Line Security LLC, won a contract with the city water authority to provide water and sewer line warranties to every city household. ULS went on to employ two of Mr. Kenney's relatives.
Councilman Doug Shields, who called for today's special council meeting on the topic, said Wednesday that he will question Mr. Kenney's relationship with Resource Development and Utility Line Security. "Why weren't there disclosures of potential conflicts of interest?" he asked.
Mayor Luke Ravenstahl, who appoints the authority's board, said he saw "no conflict," and called Mr. Kenney's relationship with RDM "well-documented."
Pittsburgh's water authority hired Mr. Kenney as executive director in 2008 at a salary of $130,000. At the time, he was operations director at the Municipal Authority of Westmoreland County.
While there, Mr. Kenney reported to Christopher H. Kerr, RDM's vice president, who founded ULS in June. RDM also paid Mr. Kenney to help with studies of water systems.
In August 2008, four months after being hired as the city water authority's executive director, Mr. Kenney hired RDM to study the agency's management structure, for which the firm was paid $85,000. The authority hasn't released the study.
Ten months later, the authority invited proposals from firms interested in offering line warranties to its customers, who could opt to have the charge added to their bills. That role had been held by Linebackers Inc., a Wexford firm. The only competing proposal came from the fledgling ULS, which won the role.
"There should have been dozens of companies that bid on it," said Councilman William Peduto. Other warranty firms have said they never got wind of the opportunity.
According to Councilman Patrick Dowd, a water authority board member, just 3,000 households signed up for the warranty. That's less than 3 percent of the 113,000 households that get water or sewer bills from the authority.
Mr. Dowd's office kept getting calls from residents without warranties who faced crushing bills for collapsed sewer pipes, which are the property owner's responsibility. He and Mr. Kenney mulled several options, and settled on assigning the warranty to all households, while allowing them to opt out.
"Once I heard that it might be possible to reduce the charge [for the warranty], expand the number of people covered, and expand the coverage [by removing claim limits], I remember saying, 'That would be great,' " said Mr. Dowd.
"It should have been rebid," said Mr. Peduto.
Mr. Dowd said that would have added months to the process. Instead, the authority amended the ULS contract to give everyone its warranty for $5 a month.
Mr. Dowd said he did not know then about Mr. Kenney's past relationship with RDM and its ties to ULS.
"The executive director should've disclosed all of that to the board" before any contract was signed, he said. "If I would've known in advance, things would've been different."
In January, Mr. Kenney told his board that ULS had hired his daughter. She subsequently quit at Mr. Kenney's request, but his niece has since interned at ULS. His nephew, Lou Esola, interned with the Pittsburgh water authority beginning in September, and was hired in the Accounts Payable Department in January.
"They have the right to pursue employment," Mr. Kenney said. He said he had no role in any of the hirings and that there was no violation of anti-nepotism rules.
The city code bars officials from hiring or promoting their parents, step-parents, children, step-children, siblings, step-siblings, grandparents, grandchildren, parents-in-law, siblings-in-law, aunts, uncles or first cousins, or exerting influence to help such relatives' businesses.
The ULS contract has spurred a civil suit in Allegheny County Common Pleas Court, an inquiry by the state attorney general's office, and claims by Utah businessman Stephen Gallo that a warranty concept he pitched around the region for two years was replicated by Mr. Kerr.
Mr. Kerr said the product is what's important. "You can't find anybody that will criticize the price, and nobody has criticized the performance."
RDM was created in 1991 by former Development Director Joseph M. Hohman, joined by former county Solicitor James Dodaro shortly after they left the public sector. In January 1992 it became a consultant to the Westmoreland County municipal authority. It now has a 14-year pact that ends in 2013.
Another firm headed by Mr. Kerr, Utilishield Inc., sells water line warranties to Westmoreland municipal authority customers.
"Everywhere you look," said Mr. Shields, "they've got their fingers in the pie."