DV Journal

Who better than a Californian to speak to the Chester Water Authority about winning a water war?  Disputes over water rights are rife in the southwest. California once fought with Arizona over the rights to the Colorado River water, and Arizona called out its National Guard to stop dam construction.

The CWA, which serves 200,000 people in Delaware and Chester counties, has been trying to fend off a takeover by Aqua PA since 2017. The issue is now pending before the state Supreme Court.

CWA contends that rates for consumers and businesses will rise if Aqua acquires the water company, and also, residents will lose access to Octoraro Reservoir.

Donald Cohen, co-author of “The Privatization of Everything: How the Plunder of Public Goods Transformed America and How We Can Fight Back,” spoke to Save CWA last week. He’s also the founder and executive director of In the Public Interest, a research and policy center.

Cohen talked in broad strokes about why publically owned entities like schools, libraries, or parks are generally good, but people can lose out when for-profit corporations buy those institutions.

“Things can be public,” Cohen said. “There are ways to keep them public. And there are ways to make them public. And most importantly, they need to be public.”

“The problem comes when their interests conflict with a public use,” said Cohen. “That’s the issue.”

In 2008, Chicago was in dire financial straits when it was offered a deal to sell its parking spaces to a private consortium led by Morgan Stanley, a parking company, and a sovereign wealth fund from the Middle East for $1.1 billion cash he said. The private group would control the city’s 36,000 parking meters for 75 years. Chicago took the deal and has lived to regret it when, for example, it needs to close a street for a parade or wants to add bicycle or bus lanes. It must pay the group for what was formerly its property.

“They just didn’t negotiate right,” he said. “They got taken.”

Donald Cohen

Often, local governments are not as sophisticated as the private companies who come in and want to buy something the public owns. And the officials see a PowerPoint with a bunch of “pretty pictures” and sign on the dotted line, ending up with a raw deal for their residents.

“This is an assault on our democracy,” Cohen said. And contracts, once signed, can be hard and expensive to break. “A deal’s a deal. Rigid contracts take away our ability to make decisions.”

Cohen also cited private companies that run prisons as another example.  Governments typically guarantee a certain number of beds that will be filled. So what happens when crime decreases? Is there an incentive to arrest more people?

In Arizona, the private contracts were for 100 percent bed utilization, but now the prison populations are going down because of the legalization of marijuana, he said.  And the state does not have the money for training and rehabilitation “because it’s locked into these contracts.”

“These are publicly-traded companies,” he said. “They spend lots of money in politics. They spend lots of money on lobbying…They have a fiduciary obligation to their investors.”

CWA Board member Joe McGinn said CWA has “bipartisan support working for us in Harrisburg.”

He asked Rep. Leanne Krueger (D-Folsom) and Sen. John Kane (D-Delaware/Chester) to ask the Delaware County council to get involved. And he thanked the two legislators for “fighting on our behalf.”

“None of them that are on the council now actually live in this district,” said McGinn, a former Delaware County sheriff.

“This is not a company that had issues. This was not a company that is in distress. This is not a company that had problems such as lead in the water. This is a company that is very well run. And sure, you can tweak it, whatever you want to do,” he said about CWA,

“Honestly, I’m really proud to be a member of the Chester Water Authority board,” said McGinn. “I’m going to do whatever I can to keep fighting for this. And I hope that the Supreme Court is going to do the right thing and we can keep Chester Water Authority as Chester Water Authority.”

Kane has received a lot of phone calls about CWA. He understands why the City of Chester wants to sell CWA because of being in state receivership and needing to sell the asset to escape that situation.

Having Aqua buy CWA “wasn’t the right thing to do,” said Kane, who introduced a bill to support ratepayers’ rights if an acquisition occurs.

However, another bill, SB 597, “written by big water companies” that would make it easier for Aqua and other companies to acquire community-owned utilities, was tabled this past week, he said. But he believes it will be brought up again.

“I’ve always believed in public utilities,” he said. “Over the last 18 months, I’ve gotten a crash course in what private water looks like, and I’m sorry to report, it’s not good.”

However, several bills to stop the sale of CWA remain stalled in committee, Krueger said.

An audience member suggested demonstrations outside the Supreme Court to sway the justices.

Cohen said people going to city and county council meetings would be more effective.

“People in motion,” he said. “That’s the only way it happens.”

CWA solicitor Frank Catania said that for-profit water companies are lobbying the state legislature hard.

“That’s their business,” Catania said. “That’s what they do. Constituents don’t understand the pressure the legislators are under.”

“Aqua has a list of every water system in the state,” said Cohen. “We should create that list and get ahead. Their strategy is to surround the cities…They’re playing a long game.”

Follow us on social media: Twitter: @DV_Journal or Facebook.com/DelawareValleyJournal

The Pennsylvania Supreme Court Monday granted the Chester Water Authority’s request to file an appeal of a Commonwealth Court’s ruling in its ongoing dispute over Aqua America’s plan to purchase the municipal water system.

In an order of “allocatur” — a petition to an appellate court for permission to be allowed to file an appeal— the Supreme Court said it would let Chester Water appeal on two issues in its dispute with Aqua and the City of Chester. Specifically:

• Does the city of Chester have the right to seize the Chester Water Authority’s (CWA) assets and sell them?
• Did the Commonwealth Court err in allowing someone other than the CWA to control the transfer of its assets?

“We’re very grateful the court has agreed to address these questions,” said CWA solicitor Frank Catania. “It’s important to preserve the public’s control of their drinking water. It’s fundamental to human life.”

Aqua America has made a $410 million bid for the water system, which serves 49,000 customers in 33 towns in Delaware and Chester Counties. The company is pledging to keep the 200,000 current CWA customers’ rates flat for a decade. Make the deal, Essential Utilities Chairman and CEO Chris Franklin told Delaware Valley Journal in October, and “there will be no movement in what the customer pays.”

CWA and its allies call that pledge hollow and they point to communities like New Garden, Pa., where ratepayers say the sale of their wastewater system to Aqua led to soaring sewer bills. “Aqua is a lot of talk,” said Margo Woodacre, co-founder of KWA – Keep Water Affordable — in New Garden.

In September, the Commonwealth Court ruled 5-2 that the City of Chester controlled the CWA and its assets, despite a 2012 law that added additional governance of the CWA from Delaware and Chester Counties.

Now CWA can go to the Supreme Court and get a final ruling on the question of whether the authority is a stand-alone agency or a subset of the city. That is particularly important because the city is operating under state receivership due to its disastrous fiscal condition.

“We look forward to the opportunity to present our arguments to the court,” Catania said. “It’s very important that these issues be resolved.”

The organization Save CWA also released a statement:

Follow us on social media: Twitter: @DV_Journal or Facebook.com/DelawareValleyJournal

In the wake of a Commonwealth Court ruling on the controversial DELCORA deal, an attorney for the private utility company Aqua sent a letter to the Public Utility Commission (PUC) urging it to “commence expeditiously” toward approving the sale. It is the most recent shot in a legal and political battle going back to 2019.

And yet after mountains of legal filings, multiple political attacks, and partisan name-calling, a key question remains unanswered: Who wins?

If Aqua convinces the PUC to approve its $276.5 million offer to buy DELCORA and the for-profit company takes over service for the 165,000 wastewater customers, is that good news or bad for ratepayers?

Delaware County has convinced the court that it has the authority to dissolve DELCORA and absorb its assets. If it takes over the operation entirely, is that a step forward for customers, or back?

Does the county even want to run the wastewater system? Or would it rather reform DELCORA and leave a quasi-independent agency in charge? Or does the council have another plan: Get Aqua to bump up the price, pocket the extra cash, and dump DELCORA’S customers onto the company’s ledger?

How did the seemingly simple sale of a water treatment system become so fraught with drama? Partisan politics — and lots of money.

Given the dominance of Democrats in Delaware County politics — there are currently no GOP members on the county council — it is easy to forget Republicans held the majority for decades. In 2019, when Brian Zidek became the first Democrat to chair the Delaware County Council in 150 years, one of his first comments was, “We want to make sure we don’t screw this up.”

One of the first items on the Democrats’ “this” list was the previous GOP-controlled council’s decision to make the DELCORA deal with Aqua on their way out the door. The new Democrat-controlled council went to court in May 2020 to block the sale by terminating DELCORA’s existence.

“From the beginning, I’ve said this deal stunk and the fix was in,” Zidek said at the time. “It was nothing more than a giveaway to a political contributor and the hardworking taxpayers of Delaware County deserve better. With the action we took today, we are advancing our goal of transparency and putting people over politics.”

Nearly two years later, the Commonwealth Court ruled that the council does have the power to terminate DELCORA. However, as Aqua pointed out in its letter to the PUC, the court also said the deal is still in play. Whether or not the goal was to protect GOP patronage jobs, the county is bound by the asset purchase agreement (APA) with Aqua.

In his letter, Aqua’s attorney, John F. Povilaitis with Buchanan Ingersoll & Rooney, highlighted a key part of Judge Patricia McCullough’s decision:

“[I]t is important to note that the County, in its demand that DELCORA terminate its operations and transfer its assets to the County, effectively places the County in a situation where it would receive a ‘contractual assignment’ from DELCORA as a matter of statutory law. Consequently, the County would, without question or condition, be bound by the terms and conditions of the [purchase agreement], just as if it were DELCORA itself in the sense that it would essentially become a ‘party’ to the contract.”

“Aqua respectfully requests that the Commission rule on the pending Petition as expeditiously as possible,” Povilaitis added.

As is often the case in politics, that depends on your definition of the word “expeditiously.” The PUC has to rule on the sale, and an administrative law judge panel has already recommended its rejection.

So, now what?

“The bottom line is that the county must comply with the existing asset purchase agreement between DELCORA and Aqua or face a lawsuit for specific performance and or breach of contract that we believe could reach hundreds of millions of dollars,” Aqua said in a statement to DVJournal.

Some county government observers say the current Democratic majority would be more than happy to avoid a lawsuit and collect a big check. They speculate the current fight is about leverage to force Aqua to sweeten the pot. With DELCORA dissolved, that cash would come straight to the county.

Delaware County Democrats say that is crazy because no matter how hard the story has been to follow, if local ratepayers suddenly see a spike in their sewer bills, they are going to blame the current council.

“The county had been consistent in its position that the transaction is unfair to ratepayers and taxpayers because there was nobody at the table looking out for their interests,” said Delaware County Solicitor Bill Martin.

As for restructuring the existing DELCORA board, attorney Frank Catania, who has often battled Aqua, has concerns.

“A person experienced in Public Utility Commission matters once told me that when dealing with the PUC, ‘If you don’t have a seat at the table, you will be on the menu.’ I hope that the new DELCORA Board will take strong action to protect the DELCORA ratepayers in the PUC proceeding and the remand to Delaware County Court,” Catania said.

And what about rate hikes? Aqua is touting a rate stabilization trust fund in its DELOCORA proposal similar to the one it says is in its bid to take over the Chester Water Authority. The idea is to set aside part of the purchase price to keep rates stable for the next few years.

And, like the Chester Water proposal, Aqua’s trust fund appears nowhere in the actual sales agreement. In other words, it is a pledge, but not a contract.

“The Trust is not part of the purchase agreement and it is up to DELCORA (and possibly the county, if they choose to dissolve DELCORA) to decide what will happen with the net proceeds from the sale,” according to Aqua’s statement. “DELCORA’s plan, as was explained to us, was to offset future rate increases by taking the $200 million in proceeds from the sale and give it back to customers through the use of a trust over the next 10 years.”

Martin describes the Aqua arrangement this way:

“The concept of the trust is that Aqua is paying the authority, but then the authority is setting aside part of the purchase to offset future rate hikes. It’s like someone saying, ‘I want to buy your car,’ then the buyer requires you to hold half the sale proceeds to pay for future repairs for the next 10 years. The net result is that they get the money, not you.”

Margo Woodacre says she has two words for promises from Aqua about protecting ratepayers: “Hog. Wash.”

Margo Woodacre is a co-founder of KWA – Keep Water Affordable, a group of New Garden residents who have seen their sewer bills soar since Aqua purchased the municipal system. She says Aqua came in with a promise of a two-year rate freeze and a cap on rate increases for ten years. It was a promise Aqua hasn’t kept, she told DVJournal.

“Aqua is a lot of talk,” Woodacre said. “They’ve got the money, they’ve got the connections, but I wouldn’t believe anything they say.”