Why would Philadelphia pay a restaurant’s utility bill?

Last month, we reported that Philadelphia pays the utility bills for some lucky non-profits. Now, as it turns out, the city has picked up the tab for one business too.

When “It’s Our Money” started asking questions in March, Robert Allen was adamant. The Parks & Recreation’s Department property and concessions management director said the city does not pay utility bills for Water Works Restaurant & Lounge, a private business owned by the politically-connected Michael Karloutsos. The eatery leases a historic building near the Philadelphia Museum of Art, from the city. It has crystal chandeliers and an outdoor deck with a stunning view of Schuylkill River. 

Parks & Recreation’s first deputy commissioner Mark Focht also said he wasn’t aware of the city covering the utility bill for any for-profit business in his department’s buildings. 

“I don’t know of any facilities in Parks & Recreation’s system where the city is paying utilities for for-profits,” said Focht.

But Parks & Rec now acknowledges that for most of the time Water Works Restaurant has been open, taxpayers have footed the bill for its utilities. And, because of inquiries by “It’s Our Money,” the Nutter administration is investigating. 

Allen now says the city paid for water, electricity and gas for Water Works from the restaurant’s opening in 2006 until 2010, and then again for about the past year. That year alone cost taxpayers $60,000 to $70,000, according to Allen. For some time between 2010 and 2011, the restaurant paid for its own utilities, according to Allen, though the city did not produce any documents to back up the claim, and Karloutsos, doesn’t remember ever being billed for utilities. 

“The city’s a large organization,” said Karloutsos. “I don’t know if it fell through the cracks or the bureaucracy. I don’t really know. I can’t speak for the city.” 

The city revealed that it has been covering the restaurant’s utilities only after “It’s Our Money” requested documents showing Water Works has paid its own bills. Allen said that is when he discovered the city had been mistakenly paying utilities for the past year. He wrote in an email that, “We dropped the ball administratively and failed to issue the bills.” He also said city would recoup this money. 

City Controller Alan Butkovitz  says it’s “improper” for Philadelphia to pay for any private business’ utility bills, even mistakenly. “That would show a very inefficient administrative process, to not catch a mistake of that magnitude,” he said.

Water Works Restaurant shares its city-owned building with a Water Department museum. Allen said the city paid for the restaurant’s utilities from its opening in 2006 to sometime in 2010 because a separate meter for the restaurant hadn’t been installed yet. Allen says the city would not be able to recoup this money. 

Citing the city’s investigation, Mayor Nutter’s spokesman Mark McDonald didn’t respond to questions about why it took so long to install the equipment, or how much Water Works Restaurant’s utilities might have cost during this time. 

Water Works Restaurant has been the site of political fundraisers for Mayor Nutter and Senator Bob Casey. Karloutsos also ran the 2002 Illinois gubernatorial campaign for former Philadelphia schools CEO Paul Vallas. Karloutsos says Water Works will pay for its utilities as soon as it receives a bill. He vehemently denies that his political connections had anything to do with the city picking up the tab. 

“There is no inside job,” said Karloutsos. “There is no preferential treatment. I don’t think any taxpayer in Philadelphia would pay an invoice that they haven’t seen.” 

Once the city’s investigation is complete, the mayor’s spokesman says he may be able to shed more light on this tale. 

UPDATE: Electricity for the past year alone cost taxpayers $70,000, according to mayoral spokesman Mark McDonald, and he estimates taxpayers have paid $225,000 on electricity since its opening.