DV Journal

The contentious battle over the Chester Water Authority’s (CWA) future has taken a pivotal turn, with the case now heading back to the Pennsylvania Supreme Court.

A federal bankruptcy judge made the decision Nov. 20 after an agreement was reached between attorneys for CWA and the City of Chester.

CWA attorney Frank Catania expressed frustration, calling the delay unnecessary. “I’m just saddened that it took this long to have the Supreme Court able to hear a matter that should have been heard in 2022,” he told DVJournal.

CWA had been in legal limbo for years due to the public fight involving the utility, city officials, and Chester Receiver Michael Doweary.

Chester solicited proposals for a CWA sale in 2020, just before Doweary was named receiver by then-Gov. Tom Wolf. One year later, the Commonwealth Court ruled Chester had the authority to sell CWA. CWA appealed to the Pennsylvania Supreme Court.

The case was halted when Doweary put Chester in federal bankruptcy court in 2022.

Doweary attributed Chester’s financial struggles to one-sided contracts, allegations of fraud, and financial mismanagement. He clashed with the city council over pay and certain contracts. Doweary noted the city has $369 million total in unfunded pension benefits and retiree healthcare. Adding to the perception of incompetence, the city lost a total of $500,000 due to a phishing scheme and an alleged ghost employee scam.

Chester officials and the Receiver presented the CWA sale as a solution to stabilize the financially strained city, particularly with regard to pensions and retiree benefits. This fall, Doweary said the utility is a political subdivision of Chester and the only substantial asset that can be monetized.

CWA claimed otherwise. Its attorneys argued in federal court documents Pennsylvania law makes it a “co-equal municipal subdivision,” not a political subdivision of Chester. That meant CWA controlled its financial future and was not subject to the whims of Chester officials.

More importantly, said CWA attorneys, the utility received most of its funding from ratepayers who include individual, commercial, and government entities. That included more than $390 million in infrastructure improvements dating back decades. Almost all of that money came from customers other than Chester, according to the utility. “State law expressly prohibits the CWA’s revenue to be used to pay for a municipality’s debts,” wrote attorneys.

In a twist, CWA gained a surprising ally in Aqua Pennsylvania. The private company, which agreed to purchase the utility from the city in 2020, told a federal bankruptcy judge in October it opposed Doweary’s plan to sell CWA.

Aqua accused Doweary of using the federal bankruptcy court “as a sword” to force CWA to sell. Aqua PA suggested the Receiver also wanted to avoid facing the Pennsylvania Public Utilities Commission (PUC) over regulatory issues. Doweary and Aqua PA were in a regulatory fight over Aqua’s planned purchase of the Delaware County Regional Water Quality Control Authority. The PUC stayed the sale last year.

Doweary’s plan, Aqua PA lawyers said, “does nothing to resolve the Debtor’s insolvency and nothing to benefit its citizenry in terms of the provision of municipal services or the cost to taxpayers, and cannot be confirmed.”

Doweary relented in October and asked the bankruptcy court to stay Chapter 9 proceedings until the state Supreme Court ruled on CWA’s future.

The bankruptcy judge agreed. It’s not known when the state Supreme Court will take up the case.

Catania suggested Doweary purposefully attempted to delay court proceedings.

“I think it was an intentional act to stretch out this process,” he said.

Catania said Doweary hasn’t announced a solution for the pension plan or whether any group agreed to concessions. He also criticized the now-scuttled bankruptcy plan as something a judge would never consider.

“This situation is their own creation. I think it’s unfortunate for the people in the city of Chester that has taken so long,” he said.

Call it an October surprise.

Aqua Pennsylvania, long interested in taking over the Chester Water Authority (CWA), filed a brief with a federal bankruptcy judge last week objecting to Chester’s bankruptcy plan.

“This initial objection is meant merely to identify some of the fatal flaws in the Debtor’s plan that preclude confirmation,” wrote Aqua attorneys on Oct. 3.

The for-profit utility submitted a laundry list of criticisms regarding the plan presented by Chester Receiver Michael Doweary in late August.

Aqua accused Doweary of using Chapter 9 bankruptcy to avoid paying any debts that arise. The utility suggested Doweary wanted to “manipulate federal law” to force CWA into a sale that benefited Chester.

Opponents of a CWA sale have long argued that, even if the City of Chester was legally allowed to sell it and keep all the proceeds (a premise they strongly dispute), the one-time revenue would do nothing to solve the city’s longstanding economic woes.

Aqua appears to agree.

Court documents said Aqua found Chester’s plan to exit bankruptcy was lacking financial information, ability to pay debts, or how it will pay for water operations while it tries to sell CWA.

Aqua castigated Doweary’s plan – or lack thereof – to the bankruptcy judge. It said the receiver’s proposal hung on various “hopes and speculation” that CWA would be sold but failed to bring up a price. Aqua suggested Doweary’s proposal would destroy CWA’s value at the expense of the city, taxpayers, and users. It said the plan wasn’t feasible and wasn’t in the best interest of anyone.

Chester’s desire to sell CWA is well known. The financially-distressed city has a total of $369 million in unfunded pension benefits and retiree healthcare.

It lost $400,000 in 2022 after now-former Councilman William Morgan was caught up in a phishing scam. Another $100,000 was lost last year in a ghost employee scheme. Doweary, who was appointed by then-Gov. Tom Wolfe in 2020, clashed with the city’s former mayor on city council pay and a parking contract.

CWA has argued it’s not a city-owned entity. Attorneys told the bankruptcy court it has complete autonomy on its affairs including finances and facilities. CWA accused Chester of trying to sell it under the cover of darkness and away from the prying eyes of state regulators.

“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 CWA attorneys last month.

The most damning argument against Doweary’s bankruptcy plan was Aqua’s claim that Chester was looking to avoid scrutiny from the Public Utilities Commission. Aqua lawyers charged Doweary and Chester with blatant violations of due process and interference with state law. They believe it’s proof that the plan wasn’t made in good faith.

“The Debtor has purposely and continuously refused to engage in negotiations with Aqua, despite Aqua being a party to proceedings to acquire the water assets and an APA to purchase the sewer assets,” wrote Aqua’s legal representatives.

Aqua said Chester had yet to prove it owned CWA. Chester agreed to sell CWA to Aqua in 2022 for $410 million – shortly after the Pennsylvania Commonwealth Court said Chester alone could terminate the CWA and did not need the approval of Delaware and Chester Counties to do so. CWA appealed to the state Supreme Court, but a decision is on hold because Doweary put Chester into bankruptcy court, nullifying the deal.

Aqua attorneys believe there’s no reason for the bankruptcy court to approve Doweary’s proposal.

“At a minimum, it is not feasible, is not in the best interests of creditors and is conditioned upon provisions that are contrary to applicable law,” they wrote.

CWA attorney Frank Catania was shocked by the filing.

“Both Aqua and CWA are arguing that this plan is not sufficiently complete, and it wasn’t procedurally filed in such a way that allows the court to give it meaningful consideration,” he told DVJournal.

As for digging the city of Chester out of its fiscal hole, Catania rejected that idea.

“The plan doesn’t solve Chester’s financial problems. It just transfers them from the city government to the CWA ratepayers and Chester residents.”

Catania suggested Doweary’s plan was just a public relations stunt meant to get some positive press for the embattled state appointee.

Neither Aqua nor Doweary responded to DVJournal’s request for comment.

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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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As chairperson of the Chester Water Authority (CWA) and a concerned ratepayer, I must sound the alarm about the recent Federal Bankruptcy court filing of a Plan of Adjustment by Chester’s Receiver, Michael Doweary. This plan, which purports to start a process to “monetize” our water assets by dissolving the CWA, is not only detrimental to our 40,000+ ratepayers and the businesses that depend on our water for their vital operations; it’s an existential threat to a critical and cherished public institution that has served our community for generations.

For over eight decades, CWA has been a model of efficiency and public service, providing high-quality, affordable water to more than 200,000 people across 37 municipalities in Delaware and Chester counties. Our success is no accident – it’s the result of dedicated employees, competent leadership, and an unwavering commitment to public service over profit. When asked about our low rates, the answer is simple: we charge only what it costs to produce our award-winning water and nothing more.

Today, CWA stands on the brink of destruction with our ratepayers becoming part of the collateral damage. The Receiver’s plan could lead to water bills rapidly doubling or tripling, effectively imposing a massive water tax on residents and businesses across Chester and Delaware County. This is not just unfair; it’s an unconscionable burden on our community.  It will also deprive present and future generations of southeast Pennsylvanians of quality water that is both clean and affordable.

Let’s be unequivocal: CWA bears no responsibility for Chester’s long standing financial distress, which has persisted for nearly three decades. Our finances are separate, sound, and our pension plan is fully funded – a stark contrast to the city’s fiscal woes. It’s unjust to force our ratepayers, most of whom reside outside Chester, to shoulder the burden of the city’s fiscal issues occurring while under state supervision for almost 30 years. It’s also unfair and unjust to put the current and future welfare of our employees at significant mismanagement risk. Why entrust a well-managed, award-winning water utility, critical to our region’s infrastructure, to a Receiver whose four-year tenure has failed to resolve Chester’s fiscal crisis and still has no workable plan to do so? His move risks compromising a vital public service that has consistently delivered quality water to hundreds of thousands of residents across the region that CWA serves.

There is no legal foundation for the Receiver’s hostile takeover plan of CWA. In 1939, CWA was established as an independent entity, and our assets do not belong to Chester.  Indeed even the Commonwealth, through its DCED, confirmed that CWA’s system is owned by the CWA.  The attempt to dissolve CWA and its board is a clear overreach that we will fight vigorously on behalf of our ratepayers and employees.

Furthermore, the claim that maintaining “public ownership” of the water system provides sufficient protection is dangerously misleading. CWA’s success stems from public operation, not just ownership. Outsourcing operations, even under the guise of public ownership, will inevitably introduce profit motives that will compromise service quality, sustainability and affordability.

CWA ratepayers are grateful for the steadfast support from State Representatives Christina Sappey, John Lawrence, Leanne Krueger, Carol Kazeem, and State Senator John Kane, along with Chester County Commissioners Marian Moskowitz and Josh Maxwell. However, our ratepayers are now urging the state leadership to take action. They are calling on Governor Shapiro and other elected officials in our service area, who have remained silent regarding the Receiver’s actions, to step forward and play a significant role in preserving CWA while also aiding the City of Chester. It’s essential for our ratepayers to understand where all their representatives and elected officials stand on this critical issue, which will affect their financial well-being and quality of life for generations to come.

Although we understand Chester’s financial challenges, exploiting CWA ratepayers as a revenue source is unacceptable and will cause long-term economic damage across the region. We strongly urge the Receiver to abandon this misguided proposal and instead engage in substantive discussions with state officials and other stakeholders to develop a solution that preserves our essential water services without imposing unjust costs on those outside the City’s jurisdiction. Raising water rates dramatically would disproportionately burden low-income and fixed-income residents, many of whom are already struggling financially.

CWA is more than infrastructure; it’s a public trust, a source of local pride, and a beacon of efficient and sustainable public service. We’ve safeguarded clean, affordable water for decades, and we intend to continue this legacy. Our community deserves nothing less, and our ratepayers are making their voices heard loud and clear.

The fight for CWA is a fight for the public good. We stand ready to defend this essential resource against those who would exploit it for short-term gain at the expense of our community’s long-term well-being.

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The Chester Water Authority (CWA) and Chester County chalked up a win in its ongoing legal battle with the Receiver for the City of Chester.

The bankruptcy court judge handling the bankruptcy case filed by Receiver Michael Doweary on behalf of the City of Chester ruled on Nov. 23 the CWA is not part of another case brought by the receiver pending in Commonwealth Court.

In the ruling by Judge Ashely M. Chan, the receiver agreed the word “authority” in the Commonwealth Court amended recovery plan does not include the CWA.

Chan stayed the CWA’s case that was to be heard by the state Supreme Court on Nov. 30. But motions to permit the high court to hear the case were filed and will be heard mid-December.

“We believe the state Supreme Court should be the one to decide it,” said CWA lawyer Frank Catania. CWA is fighting for survival against the state-appointed Receiver’s attempts to sell it to Aqua PA. And even if he succeeded, Catania said, “it is an undecided — and vigorously disputed — as to what money, if any, the city would get from a sale of CWA.”

The city of Chester has a long history of financial turmoil stretching back 27 years. During that time, it has been under the financial authority of four receivership regimes authorized by the Pennsylvania Municipalities Financial Recovery Act of 1987.

“Since 2017, the City of Chester has attempted to monetize the assets of the CWA, an authority that services more than 200,000 ratepayers, the vast majority of whom reside outside the boundaries of the City, including more than 34,000 ratepayers residing in Chester County where critical infrastructure is also located,” Delaware County argued in a legal filing. CWA supporters believe the Receiver had his eye on the authority and his requests to the courts reveal his intentions.

The receiver had “asked the court for permission to take over and run any authority that the City of Chester created. That’s all it said. It didn’t say, ‘not us [CWA],'” said Catania “So clearly we were concerned. If the judge gave a broad interpretation of the language, that would include us, and the Receiver has no business trying to run a water company, right?”

Opposition to Chester’s attempts to sell the CWA to Aqua PA is bipartisan in the Delaware Valley. In addition to Democratic opponents on the county council, two GOP state reps previously filed an amicus brief last month to oppose the sale.

“Act 73 of 2012 abolished Chester city’s control over the CWA board. It is outrageous to suggest that years later, the city can override the clear intent of the Legislature, take control of CWA, and sell it to the highest bidder. I am grateful that the Supreme Court has agreed to review this matter, and I will continue to fight to prevent any takeover of Chester Water Authority,” said Rep. John Lawrence (R-West Grove).

Lawrence, whose constituents in Chester and Delaware counties are served by CWA filed the brief with House Speaker Bryan Cutler (R-Lancaster).

“The CWA board has steadfastly and responsibly served the hundreds of thousands of customers who rely on this municipally provided service,” Cutler said. “The Commonwealth Court’s ruling undermines the board’s rightful position to continue to recognize the best interest of its customers and sets a dangerous precedent for all water consumers in the Commonwealth. We strongly urge the Pennsylvania Supreme Court to take a closer look at this case.”

And the state Supreme Court is where CWA supporters want this case heard, while the Receiver has tried to get the Commonwealth Courts to make the decision.

“Doweary would rather have the issue heard before a single judge in a different case where the Chester Water Authority is not a party. That’s what he was trying to do. Then the next step in his plot—a hostile takeover– was on the day before Veteran’s Day. That’s when the city filed for bankruptcy, with no prior warning.”

“The Receiver has a nasty habit of trying to pull holiday surprises,” Catania added. “So we’re always on a heightened state of readiness around the holidays.”

“He failed, but he’ll try again,” said Catania.

The receiver did not respond to a request for comment on Tuesday.

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When Receiver Michael T. Doweary filed for Chapter 9 bankruptcy last Thursday for the City of Chester, he said it was the only way to resolve the city’s ongoing fiscal crisis.

“Chester’s financial and operational problems are far worse than my team of professionals has ever encountered. The status quo has not worked, is not working, and will not work. The residents of Chester deserve better,” Doweary said in a press release. He pointed to a projected $46.5 million deficit in 2023, including $39.8 million in past-due pension payments.

But representatives for the Chester Water Authority (CWA), locked in a struggle against the city’s bid to sell the CWA to Aqua PA, it was just the latest misstep by the city’s state-appointed overseer. And it leaves far too many unanswered questions.

“The Receiver has had two and half years to turn Chester around,” said CWA attorney Frank Catania, pointing to several high-profile fiascos like the city losing $400,000 through an internet phishing scam on the Receiver’s watch.

And, Catania added, Doweary did not tell the Commonwealth Court that Chester stands to gain $70 million through the sale of DELCORA (Delaware County Regional Water Quality Control Authority) to Aqua or, alternatively, get its sewer systems back so it could sell them itself.

“It’s a robbery in progress,” said Catania of Doweary’s revised Receivership document. Doweary is “trying to shift the burden (of paying for water and sewer) from government to citizens,” both in Chester and in parts of Delaware and Chester counties. Some 80 percent of CWA customers are suburban and if Doweary has his way, those customers will subsidize the city.”

“The Receiver uses bank robber’s logic: I need money. You have money. I’m taking it.”

Doweary declined to respond to repeated requests for comment. In a press release, he said he avoided bankruptcy as long as possible, and he pointed fingers at city officials.

“Since my appointment over two-and-a-half years ago, I have worked to avoid this day,” Doweary said. “However, Chester has a severe structural deficit that cannot be addressed by one-time fixes, has unaffordable retiree benefit liabilities, and cannot reliably provide vital and necessary services to its residents.”

According to Doweary, Chester’s elected officials and employees are not cooperating with his stewardship. For example, Councilman William Morgan lost the money to the phishing scam — involving a fake request for payment — in June, but he was not notified until three months later. He also pointed to a $750,000 IRS penalty against Chester for incorrect payroll taxes and to a salary being paid to an incarcerated former employee.

Doweary acknowledges he is seeking more control over city operations and also wants the court to award him control over the CWA. He also asked the court to tell employees and elected officials that they must not interfere with the directives of the chief operating officer or the Receiver.

What the Receiver won’t discuss, however, is the city’s outstanding debt for the high-powered law firm, Greenberg Traurig, for a $1 million contingency fee. How could Chester, struggling to pay its bills, afford to pay $1 million?

DVJournal has requested the underlying documents related to retaining Greenburg Traurig, but the Receiver has declined to provide them or explain what work the firm was supposed to provide to the taxpayers of Chester.

CWA is in litigation with the Receiver. Oral arguments in that case are scheduled before the state Supreme Court on Nov. 30.  However, a bankruptcy filing stays other court cases. Lawyers are meeting with a bankruptcy court on Tuesday.  Also, at 1 p.m. on Tuesday, the Municipal Financial Recover Advisory Committee will meet. That meeting will be streamed. 

“[Doweary] is court shopping,” said Catania. “He wants to avoid the Supreme Court and go to Commonwealth Court.”

“He’s going to try to convince (the Commonwealth Court) judge that he should be in charge of CWA,” added Catania.  “He couldn’t even make sure the city that Chester had proper insurance coverage and he wants to sell the water authority and serve 200,000 customers fresh drinking water? It’s outrageous. He’s got to be stopped. He did not tell the court the whole story that Chester stands to get $70 million from the sale of DELCORA.”

Instead of a Receiver, the state should step up for Chester, like it previously did Philadelphia, Pittsburgh, and Harrisburg, said Catania.

“This is an orchestrated crisis,” said Catania. “And whenever it’s convenient, Doweary brings the city retirees out for public relations purposes.

“He treated Chester retirees as hostages,” he said.

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Two Republican state representatives filed an amicus brief to oppose the city of Chester’s bid to sell Chester Water Authority to Aqua PA.

The case is expected to be heard by the state Supreme Court on Nov. 30.

“Act 73 of 2012 abolished Chester city’s control over the CWA board. It is outrageous to suggest that years later, the city can override the clear intent of the Legislature, take control of CWA and sell it to the highest bidder.  I am grateful that the Supreme Court has agreed to review this matter, and I will continue to fight to prevent any takeover of Chester Water Authority,” said Rep. John Lawrence (R-West Grove).

Lawrence, whose constituents in Chester and Delaware counties are served by CWA filed the brief with House Speaker Bryan Cutler (R-Lancaster).

“The CWA board has steadfastly and responsibly served the hundreds of thousands of customers who rely on this municipally provided service,” Cutler said. “The Commonwealth Court’s ruling undermines the board’s rightful position to continue to recognize the best interest of its customers and sets a dangerous precedent for all water consumers in the Commonwealth. We strongly urge the Pennsylvania Supreme Court to take a closer look at this case.”

Previously, CWA rejected an unsolicited $320 million takeover offer in 2017. Subsequent lawsuits focused on whether the CWA Board or the city of Chester has the ultimate authority to approve a sale of the water authority. A Delaware County court decided in favor of CWA, but on appeal t the Commonwealth Court reversed the lower court’s ruling.

Founded in 1939, Chester Water Authority serves over 200,000 customers in Chester and Delaware counties. In addition to water treatment facilities, the authority owns and operates the Octoraro Reservoir, and water pipelines connecting the reservoir with the Susquehanna River and facilities in the city of Chester.

A spokesperson for Aqua, which made a $410 million bid for the system, declined to comment since the matter is in litigation.

Aqua and other privately owned corporations have been buying area water and sewer systems after a law signed in 2016 permitted them to pay “fair market value” for those public utilities.  However, residents have been organizing to fight back against these acquisitions, fearing higher rates. They have had some success, notably garnering public support to pressure the Bucks County Commissioners to oppose a planned deal for Aqua to buy the Bucks County Water & Sewer Authority for $1.1 billion.

In the brief, the lawmakers noted that the takeover jeopardizes the reservoir, which Cutler’s constituents enjoy.

The representatives argue in their brief that the City of Chester does not have the right to decide on the sale without the consent of Delaware and Chester counties, which are also represented on the CWA board.

Frank Catania, a lawyer for CWA, said the CWA board members terms are up in November. The Chester County commissioners reappointed two board members on Wednesday, Noel Brandon and Leonard Rivera, along with Erik Walschburger, deputy county administrator as a new board member.

On Thursday, the CWA board will hold a special meeting to discuss whether to join the U.S. Water Alliance and its One Water Program. That group promotes sustainable fresh water and holistic water management, according to its website.

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America is facing serious and growing water infrastructure challenges, meaning communities across the country are having important conversations about how to ensure safe, reliable water. One of those conversations is happening right now in Chester where the city, which owns the Chester Water Authority (CWA), is looking to get out of the water business and put it in the hands of other local experts.

As both a CWA customer and president of the National Association of Water Companies (NAWC), which represents America’s water companies, I am invested in this ongoing conversation about the future of Chester’s water system and am concerned about misinformation concerning the potential sale.

A wide sampling of that misinformation was part of a recent editorial written by local activists.

Chester is looking to sell its system for good reasons. First, Chester faces significant financial challenges and is only the second Pennsylvania town to be placed into receivership. The sale of CWA is a solution that will bring in much-needed revenues while also placing the system in the hands of professionals.

By selling to a professional water company, Chester will gain the operational expertise that is the hallmark of the private water industry, which currently serves over 4.4 million Pennsylvanians. Despite activist attempts to paint a rosy picture about CWA, the reality is the system has been plagued by operational inefficiencies for decades. A water company will be able to address those inefficiencies, offer a strategic investment plan that removes local politics from decisions about infrastructure, and ensures residents have safe and reliable water for generations to come.

Instead of providing a factual assessment of CWA’s situation, the editorial’s writers resort to the very thing they accuse water companies of doing–scaremongering. For many years, activists on the fringes have tried to demonize particular industries by putting “big” before it. Big Oil. Big Pharma. Big Ag.

But this is a new, absurd one. Big Water?

I assume they are referring to the water companies that:

• Serve 73 million Americans, partnering with local communities to ensure the highest level of water quality and reliability at affordable rates. These very companies have been proven in study after study to provide the highest quality water–higher than that provided by government-run systems. In fact, EPA data show systems run by Pennsylvania water companies are 34.7 percent less likely to have Safe Drinking Water Act violations compared to government-run systems.
• Invest billions of dollars annually into community water systems so that when you turn on your tap, you know your water is safe to give to your family.
• Provide affordability programs to assist those who may struggle to pay their water bills, unlike the government-run systems.
• That employs tens of thousands of local residents who live in the communities they serve every day–people who are a part of the fabric of the community’s life and you see at the gym or the grocery store or on the sidelines at youth sporting events.

Putting aside the writers’ obvious red herring, it is incredible how many basic facts about water system operations their editorial got wrong.

For example, their claims about how water companies generate profit are laughably inaccurate and expose just how little they actually know about water utilities. They claim water companies want inflated prices for water systems because higher purchase prices result in bigger profits.

That isn’t at all how it works.

The price a water company pays for a system has absolutely nothing to do with how much of a return it can earn. A water company can only earn a return on the dollars they invest in necessary infrastructure repairs and upgrades on systems it already owns.

The writers are right about one thing – water companies are “regulated utilities.” Unlike government-run systems, water companies have strict oversight from independent state regulators. In Pennsylvania, that’s the Public Utility Commission (PUC).

I had the pleasure of serving as PUC chair and know how these protections benefit customers. The PUC provides rate regulation–meaning those expert regulators systematically review company expenditures and assess system needs as part of a transparent, months-long rate-setting process. That’s right: decision-making on customer rates rests in the hands of expert independent regulators, not water companies or local politicians who want to be re-elected.

City leaders and residents should not be misguided by those who are only interested in blocking proven water company solutions, not fostering a productive discussion about what is best for Chester’s residents. The expertise, strategic investment, and singular focus on water system operations that comes from working with a water company will ensure that current CWA customers like my neighbors and my family have safe drinking water and reliable service.

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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.”

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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:

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