Despite Mayor Street's recommendation that the city sell Philadelphia Gas Works, his chief of staff conceded yesterday that such a sale may not be possible.

"It may turn out that, as badly as we want to off-load the risk, that it's not feasible," Joyce Wilkerson, Street's chief of staff, said in an interview. "This is an enormously tricky problem."

In a speech outlining his new budget plan, Street painted the city-owned gas utility - saddled with a billion-dollar debt - as "the greatest risk to the financial stability of the city."

Until very recently, the mayor and his subordinates had tiptoed around the topic of selling PGW, and instead played up the city's efforts to nurse it back to health. But yesterday, he said the city had "no alternative" to considering a sale.

"We simply cannot afford to fund PGW's cash-flow and operating requirements out of the city's general fund," Street said. "To do so will surely bankrupt the city."

City Council voted yesterday to lend PGW $20 million as the second installment of a $45 million relief package approved in November.

It appears doubtful that the loan will be repaid. Years of mismanagement have left PGW saddled with debt and crippled by a glitch-ridden billing system.

A City Council hearing next week will assemble experts to testify on the drawbacks and benefits of unloading the utility - if a buyer can be found.

One obstacle will be figuring out how to transfer nearly $800 million in tax-exempt, long-term bonds to a buyer who presumably would not have similar tax-exempt status.

Peco Energy Co. and Public Service Electric & Gas Co., of Newark, N.J., have often surfaced in conversations about potential buyers, although neither company has publicly confirmed an interest in buying PGW.

Talk of a PGW sale is nothing new.

"I bet about every 15 years, we've done some kind of project on PGW and its state of disrepair," said David Thornburgh, executive director of the Pennsylvania Economy League's Eastern Division.

He said the gist of those periodic studies was: "Just about everybody would be better off if the city didn't own those assets."

But the pain of unloading one of the city's prime patronage and social-welfare vehicles has so far been too much for any mayor to withstand.

"It's not been run as a business," Councilman James Kenney said.

As for PGW's social programs, such as discounts for seniors and subsidies for low-income customers, Kenney said: "They're noble, but the people that are paying for them are working-class, middle-class families that don't want to live here any more, and they move out."

Other utilities manage to provide assistance for poor customers far more efficiently than PGW does, he said.

In June 1998, the city hired a Harrisburg consulting firm, Public Financial Management Inc., to examine how natural-gas deregulation might open the door for the sale of PGW.

The study found that, in some cases, the city's goals conflicted with the likely game plan of any private industry buyer.

City goals included:

Getting top dollar for PGW while finding a way to continue its $18 million annual dividend payments to the city.

Encouraging PGW's new owners to offer competitive rates that would not scare away businesses considering sites in Philadelphia.

Keeping jobs for current PGW workers.

Retaining PGW's social programs.

"Reconciling these four criteria may not be fully possible," the study said.

Even so, some council members seemed receptive yesterday to the notion of a sale.

"In all likelihood, this is a good time for them to be looking at the possibility," Council President Anna C. Verna said. "It is an albatross around our neck. If the price of natural gas keeps skyrocketing, I don't see how many of our citizens are going to pay for it."

"We have reached the point where Band-Aids, and gauze, and crutches are no longer helping in this situation," Councilman Michael Nutter said.

Toledo Blade

-- Anonymous, January 28, 2001