Consultants advise selling Chester Water Authority

Consultants advising Chester recommend selling the Chester Water Authority to boost city finances — a move authority officials say would increase rates for customers and be tied up in court for years.

In a May 4 report entitled, “Financial Condition Assessment of the City of Chester,” Econsult Solutions concluded selling the authority was the only way the city’s finances would stabilize. The state declared the city in distress in 1995. If the city cannot provide a sound fiscal plan by the end of this month, the state recovery deadline may extend to 2021 or the city may enter state receivership.

The state Department of Community and Economic Development hired Econsult, one of the city’s recovery coordinators, to do the financial analysis, Econsult states that the city’s budget challenges, particularly its pension plans, will worsen in the years to come.

In May 2017, Aqua America offered to buy the authority for $250 million. After the authority board rejected the offer, city officials claimed they had the right to reclaim, transfer the authority’s assets, and to dissolve the authority altogether.

“The city must explore the monetization of municipal assets, including a potential transaction involving the Chester Water Authority, reconsider recommended reductions in resident earned income tax rate and consider further workforce reductions,” the report states.

The sale of the water authority was a key suggestion.

“(T)his potential monetization is the only option we can identify that could produce sufficient funds to allow the city to achieve longterm fiscal balance,” the report stated, adding that it recommended that DCED give Chester a grant to pay its own advisors during the sale.

Water authority officials decried that conclusion.

“(M)uch of the information contained in the assessment is inaccurate, misleading or creates false inferences in order to justify an allegedly brand new recommendation that the

authority should be liquidated to satisfy short term liquidity needs of the city of Chester and to divert attention from the commonwealth’s and its appointed recovery coordinator’s decades-long failures in its oversight of the city,” Cynthia F. Leitzell, chairwoman of the Chester Water Authority, wrote to Econsult on May 18.

Selling the authority, Leitzell said, would result in increased rates for customers and could be tied up for years in court. Some 22 percent of the authority’s customer base is in the city and 78 percent is in elsewhere in Delaware and Chester counties. It has more than 42,000 customers.

Michael Gerber, DCED press secretary, said the department has been committed

to the city’s long term financial health throughout the past two decades.

“The city is projected to have multi-million deficits in each of the next five years and just last year received $2 million in emergency funds from DCED because the city could not make payroll,” he said. “That is why the city requires dramatic action to reach financial health.”

He said the department has been upfront and transparent with all information requests that “do not involve legally protected or confidential information.”

The Econsult report noted that one of the largest sources of revenues for the city was the Harrah’s casino, with $10 million in slots revenue and $1.4 million in table games revenue. Authority officials said that

money goes to the state.

“I thought they were supposed to be solving crises, not creating crises,” authority Solicitor Francis Catania said. “They have one goal and they made it clear – they want the Chester Water Authority to be sold. It’s clear through their actions that’s what they’re moving towards.”

He said the state passed a law last October that redirects funds gained from any new future sources of gaming revenue to be sent to the state rather than the host communities, which, in this case would be Chester.

“They could erase Chester’s budget deficit with a stroke of a pen,” Catania said. “All they would have to do is give the city the money the city is entitled to ... The casino is in the city.”

ANNE NEBORAK — DIGITAL FIRST MEDIA Chester Water Authority on Welsh Road in Chester. It is responsible for water for Chester, which comes from the Octoraro Reservoir and the Susquehanna River.