In an attempt to fight off a City of Chester takeover, the Chester Water Authority (CWA) asked a federal bankruptcy judge to resume a case before the Pennsylvania Supreme Court. CWA attorneys filed a motion with a federal bankruptcy judge last week that accused Receiver Michael Doweary of court shopping.
“[H]e is attempting to override state’s rights as a disguised means of sucking hundreds of millions of dollars from the ratepayers whom CWA serves,” said CWA Board Chair Noël Brandon.
Doweary has debated the CWA over the utility’s future since Gov. Tom Wolf appointed him to the job in 2020. He put Chester into Chapter 9 bankruptcy in late 2022.
Chester’s finances have been troubled for decades amid allegations of financial mismanagement and fraud.
Doweary said in 2022 that a one-sided parking contract hurt Chester’s bottom line. A phishing scheme caused the city to lose $400,000 after then-Councilman William Morgan mistakenly transferred the cash to a scammer. The city’s former Recreational Services Manager was arrested last year in a ghost employee scheme.
The biggest issue for Chester remains its retiree benefits. According to federal bankruptcy documents, the city has a total of $369 million in unfunded pension benefits and retiree healthcare.
Many in Chester city government, hoping to avoid a painful fiscal reckoning, view CWA as the golden goose. Selling the valuable asset could put a huge dent in the city’s debts. The City Council solicited bids for CWA in 2020, just a few months before Doweary was named solicitor. A year later, the Commonwealth Court ruled that, despite objections from the CWA board, the City of Chester had the power to sell the utility. CWA has appealed to the state Supreme Court.
Months later, Doweary put Chester into bankruptcy – halting the Supreme Court case.
Doweary saw a CWA sale to a private corporation as a way to help balance the bankrupt city’s books – specifically with pension and retiree benefits. He’s argued the utility is a political subdivision of Chester. Doweary called the stormwater, sewer, and water assets “the only substantial assets that can be monetized” during an event put together by Chester Mayor Stefan Roots.
CWA rejects the proposals as ridiculous.
In a lengthy court filing, CWA attorneys said the utility has “complete autonomy” regarding its affairs – not the city. All buildings and facilities are owned by CWA, and its board handles all finances. That meant the city can’t usurp its authority and sell the utility under the cover of darkness.
Court documents said it’s the ratepayers who funded the more than $390 million infrastructure improvements – not the city. CWA attorneys said Chester accounted for one percent of the utility’s revenue which came from payments in exchange for water services.
“In order to effectuate the Plan it proposes, the City would be asking this Court to sanction an entire re-write of Pennsylvania state law under the Municipal Authorities Act,” said attorneys.
The key part of CWA’s argument is that the case isn’t an issue of municipal governance. Attorneys said the bankruptcy court could adjust the city’s debts, but not adjust a state’s laws. Since CWA isn’t a subdivision of Chester, opined attorneys, then it’s up to the state Supreme Court to determine if Doweary can sell off CWA’s assets.
“The City is pretending as though its ability to do so is settled law (it is not; hence the Pennsylvania Supreme Court’s acceptance of this precise issue on appeal),” they said.
Earlier this month, Doweary claimed any sale of CWA would include a clause to keep it under public control. Utility attorneys found that suggestion laughable and said it left open the possibility that a for-profit, publicly traded company takes control of CWA.
It is not known when the bankruptcy judge could decide on CWA’s motion.
Doweary did not return a call requesting comment.
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