March 3 (Bloomberg) — Philadelphia agreed to sell its natural gas utility to UIL Holdings Corp. for $1.86 billion, giving the fifth-largest U.S. city a needed cash injection for its pension fund.
Proceeds from the sale of Philadelphia Gas Works, the nation's largest municipally-owned natural gas utility, will add at least $424 million to a pension plan that's now less than 50 percent funded, Mayor Michael Nutter said in a statement today. UIL agreed to keep rates frozen for three years, establish a second corporate headquarters in the city and maintain at least 1,350 jobs at the utility.
Philadelphia, which has $5.1 billion in unfunded liability from its city-worker pension system, began steps to sell the utility two years ago. Financing retiree benefits is a deepening challenge for localities nationwide as they recover from the 18- month recession that ended in 2009. The median pension-funding ratio for states fell to 69 percent in 2012, from about 83 percent five years earlier, according to data compiled by Bloomberg.
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