Chester to open bids today for sale of water authority
CHESTER » Gov. Tom Wolf’s recent declaration of a “fiscal emergency” in the cash-strapped city appears to have reignited a dispute about who owns the assets of the Chester Water Authority – and who can sell them.
City Council is expected to vote on authorizing commencement of a bid process for those assets during a virtual meeting being broadcast over Facebook at 10 a.m. today, according to a meeting agenda.
But CWA Solicitor Frank Catania said Tuesday that there is an injunction in place as part of more than a dozen pending legal actions that would preclude that vote from taking place.
The tug of war currently playing out between the city and authority goes back to at least 2017, when Aqua America Inc. first offered to buy CWA for $320 million. Aqua’s Chief Executive Officer Chris Franklin previously said the company proposed a 10-year moratorium on rate hikes as part of that offer, but CWA rejected the proposal, foreseeing unabated future raises and development of currently protected land.
Facing mounting pressure from deficits in recent years, however – particularly those related to mounting pension costs – the city has continued exploring a possible sale to help boost itself out of “financial recovery” status under Act 47.
Chester initially seemed open to a proposed $60.2 million settlement from CWA that would include a 10-percent rate hike for its customers in exchange for the city releasing any claims to authority assets for 40 years.
Aqua Pennsylvania, as a CWA customer, sued to halt that deal, alleging the hike would result in $75,000 being directly passed on to its customers with no corresponding benefits. Chester City Council approved a resolution to issue a request for proposal to value CWA assets shortly thereafter. The issue has since been a matter for the courts, though that cooled for a little while when the state began implementing drastic COVID-19 mitigation efforts earlier this year.
Then came the fiscal emergency declaration last week. One line of a “concise statement of facts” issued by the Pennsylvania Department of Community and Economic Development supporting the April 13 declaration appears to assign the CWA to Chester as an “asset” – a determination the authority has staunchly contested in its multiple legal challenges.
As the concise statement indicates, selling the utility assets of the CWA could generate millions of dollars in support of Chester’s
long-term fiscal recovery, but “a resolution to the litigation related to the sale of authority assets is not imminent and defeat (in court) would result in the loss of a huge source of potential revenue for the city.”
A DCED representative did not respond to requests for comment Tuesday, but the CWA said in a blistering seven-page response to the statement Monday that “the idea that the authority is the panacea to the city’s problems is short-sighted government thinking at its worst” and that selling its assets would be “a counterproductive theft of hundreds of millions of dollars from ratepayers throughout Chester and Delaware counties.”
The response notes the city itself has not counted CWA as an asset in audited financial statements overseen by the DCED and what it identifies as an “Act 47 Team” going back to at least 2003.
“The city cannot claim in every single one of its audited financial statements going back decades that the authority is not a city asset, and then suddenly reverse course and now claim it owns the authority,” according to CWA. “Likewise, the Act 47 Team cannot sign-off just a few months ago on the 2016 Audit explicitly stating the authority is not a city asset, and now claim that it is.”
The CWA board was under the city’s sole control until 2012, but it is now made up of three representatives each from Chester City, Chester County and Delaware County. About 22 percent of the CWA’s 42,000 customers are in the city of Chester, while the remaining 78 percent are elsewhere in Delaware and Chester counties.
Chester entered Act 47 status as a financially distressed city in 1995 and has since adopted amended recovery plans in 2006, 2013 and 2016. The city’s current receivership consultant, Econsult Solutions, recommended selling the CWA in the most recent plan.
But the CWA argues that any such sale would ultimately have a detrimental impact to both residential and business customers who would see their rates “skyrocket.”
In its response Monday, the authority claimed that a sale to a private company would increase water bills for large commercial and industrial customers by more than $1 million per year and the average residential customer would see an annual water bill increase of $500.
An April 11 letter from CWA Chair Cynthia Leitzell to Chester Mayor Thaddeus Kirkland indicates that the settlement offer is still on the table, however, and represents the “only legal option available to the city.”
Kirkland said Tuesday that he is unable to have any kind of conversation with Leitzell while litigation is pending, but that his position remains the same as it was at the beginning of the process two and a half years ago.
“We’re going to do the very best thing for our ratepayers, for our constituents and for the employees,” Kirkland said. “We’re going to be very transparent in all that we do and it’s not going to be negotiated or worked out by the way of the newspapers. We’re going to do this the right way and the legal way.”
City Solicitor Ken Schuster also indicated in an April 13 response letter to attorneys for CWA that the city intends to take up the RFP again in a fair and transparent manner, and directed all future communications to be done between attorneys so that there is no perception that the process is being circumvented.