Daily Local News (West Chester, PA)
Chester Water Authority rejects $250M offer from Aqua
ASTON >> The board of the Chester Water Authority unanimously rejected an acquisition offer from Aqua America while approving a study to determine if the sale of the system would be in the best interest of its 42,000 customers.
On May 8, the board received an unsolicited, hand-delivered
eight-page letter from Aqua that outlined its proposal to purchase the authority’s 656 miles of pipeline and customer base for a net of $250 million.
It was standing-room only at the regularly scheduled board meeting Thursday. The room was lined with employees and customers concerned about the impact of a potential sale.
“From our standpoint, it’s against everything that Chester Water’s all about – lower rates, best quality of water available,” Fred Blair, five-year CWA employee, said. “It’s like Walmart moving into a small town and taking over a mom-and-pop hardware store.”
Also in the audience was Keith Gabage, senior manager of business development for Pennsylvania American Water, who had introductory letters for board members. The system provides water and wastewater services to 2.3 million people and has assets of $4.4 billion.
Chester Water Authority serves more than 42,000 customers in parts of Delaware and Chester counties and the city of Chester.
Aqua America serves about 3 million people in eight states and has become the second largest publicly traded American water company.
Marc A. Lucca, president of Aqua Pennsylvania, said the geographical proximity of Aqua’s system to that of CWA’s is significant.
“They have a source water out of the Susquehanna River ... and then they move the water about 38 miles in a pipeline, which has some sections of redundancy, parallel lines, but very little,” he said, adding that 5 miles of a 38-mile line has a parallel line. “If they have a break in that pipeline anywhere along the way, the people downstream ... may have an interruption of service.”
Lucca added, “The type of line that it is a pre-cast concrete cylinder pipe. Great pipe – until it breaks and when it breaks, it’s very difficult to get fittings quickly to put the pipe back together.”
CWA Solicitor Francis Catania objected to the idea that there is one pipeline connecting its system’s water source to the region.
“That’s not true at all,” he said. “All the water systems in the area are interconnected. Aqua buys water from us.”
Lucca said CWA’s 160 employees would be retained if an acquisition took place.
“Our roots are right here in Delaware County,” he said. “We’ve been here for 130 years. We want them to know we would absolutely offer the employees their jobs. They’ll have expanded opportunities with a larger company. We believe we all get better together because of the distribution system ... Additional source water creates improved reliability for their customers and ours, so we get better together. And, the funding, once this deal is done, can be distributed where the board members so chose.”
During the meeting, Lucca spoke to what that money could do.
“We do believe there are opportunities that will include holding the line or taxes, paying down debt, bolstering law enforcement and preserving open space,” he said. “It helps Chester County, Delaware County, the city of Chester to reprioritize projects and investments and it does help the city of Chester emerge from Act 47 status. There is no community that we serve or that is in this area that should stay in Act 47 status when there is this opportunity that exists today.”
Catania retorted that the mission of the Chester Water Authority board had nothing to do with those items.
“The promise of the benefits are not what their job is,” he said. “They don’t levy taxes, they just set water rates.”
The solicitor also spoke of how the board was notified about this offer.
“The board was really taken aback by how this proposal was presented to them,” Catania said. “They were very surprised.”
Lucca said an Aqua official notified Chester Water Authority in the last month about the proposal.
“I’m not sure that they were surprised,” he said. “They got a letter, I think they were given a heads-up the letter was coming.”
CWA customer Joe DeMarco offered his comments during the meeting.
“Why sell something that works?” he asked. “Why sell something for 50 cents on the dollar? This is not a fire sale ... At the end of the day, it’s going to be the people paying the bills that are going to pay for it.”
CWA board Chair Cynthia Leitzell said, “We have the best interest of the rate payers of Delaware County, Chester County and the city of Chester as a paramount concern as well as the quality of the water that we produce as well as our employees.”
CWA board member Joseph McGinn said, “My boss are the ratepayers so I’m not going to do anything that doesn’t benefit the ratepayers.”
Concerns had arisen based on reports that average water rates for CWA customers range from $35.15 to $41.70. Aqua’s average rates, in the same report, were indicated to be $65.20.
Lucca said the rates would be part of a discussion process during sale conversation and that rates are impacted by capital investment, infrastructure improvements, operations and maintenance expenses and sale price.
Part of the motions made Wednesday resulted in the Chester Water Authority agreeing to do an analysis of potential sale and its impact on customers within the next 60 to 90 days.
“We’ve got to do the thorough analysis to resolve this once time and for all,” Catania said. “The only question that the Chester Water Authority is going to study going forward is ‘Should we even sell and how does that affect the rate payers?’”