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Towamencin to Continue Sewer Sale in Spite of ‘Home Rule’ Charter

The Towamencin Board of Supervisors will continue with its planned sale of the municipal sewer system even after residents voted to pass a charter that scrapped the sale and gave citizens more control over municipal water ownership.

Residents were successful in last month’s primary election in passing a “home rule charter” that effectively negated the proposed sale of the sewer system. The charter passage resulted from efforts by a local chapter of the group Neighbors Opposing Privatization Efforts (NOPE) to halt the utility sale to the controller Pennsylvania-American Water Company (PAWC).

In a statement after the primary results, the Board of Supervisors said it “acknowledge[d] that the Charter will be the law of the Township as of July 1,” but the relevant issue “is whether a prospective law can upend a contract.”

“[T]he Township legal team does not believe the passage of the Home Rule Charter negates the sewer sale under current Pennsylvania law and the Pennsylvania Constitution,” the board said.

“There is strong legal precedent against overturning pre-existing contracts based on the passage of new laws. As such, we do not intend to seek to terminate the contract.”

Towamencin officials could not be reached for comment on the proposed sale. Town resident Kofi Osei, who helped lead the local NOPE chapter to victory in the primary vote, said a lawsuit might be in the works if the town fails to back down.

“The charter is effective July 1, so if neither party attempts to terminate the contract, we will pursue legal action,” he said.

“We haven’t really started that process yet, so there is quite some time before the sale possibly closes,” he added.

“If this goes to court, I believe it will be a landmark case about the extent home rule charters can restrict local governments.”

May’s successful charter vote came after the Towamencin Board of Supervisors voted to sell the town’s sewer system to NextEra Energy in May 2022, with the proposed sale eventually being shifted to PAWC.

Residents revolted against the proposal, leading to a citizen’s commission and the home rule proposal that effectively revokes the town’s utility sale.

The town had moved to sell the utility under Pennsylvania’s Act 12. Passed in 2016, the rule modified the state’s regulations for the valuation and purchase of municipal water systems, allowing private concerns to buy more of them.

Residents around the Delaware Valley and the state have united against proposed utility sales in recent years, with NOPE chapters springing up in Bucks County and other parts of Montgomery County.

In April, persistent resident protests led the supervisors of Chester County’s Willistown to drop a proposed utility sale to Aqua PA, invoking a kill clause in the contract after several years of debate.

Aqua has also moved to take over utilities such as the Delaware County Regional Water Authority, though a judge earlier this year ordered a stay on that deal due to contract disputes.

State Rep. John Lawrence (R-West Grove) has proposed repealing Act 12, claiming the rule had resulted in significantly higher utility fees for ratepayers around the state.

Osei said he expects any lawsuit brought by residents to ensnare the deal in a web of protracted legal proceedings.

“I personally think it would take years to fall in the Township/PAWC’s favor.”

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Towamencin Residents Claim Victory in Vote Against Sewer Sale

Residents of a Montgomery County town are claiming victory in a vote to revise their township status and institute “home rule.” It is a measure driven by a bid to prevent the controversial sale of its municipal sewer system.

Unofficial election results released Wednesday show Towamencin Township residents voted in favor of the “home rule charter ballot question,” which will revise Towamencin’s second-class township code and institute the “home rule” charter in question.

The vote was 2,728 in favor and 2,418 against.

Longtime resident Kofi Osei told DVJournal the charter vote came about after the Towamencin Board of Supervisors voted to sell the town’s sewer system to NextEra Energy in May 2022. Residents revolted against the proposal, he said, leading to a major citizen’s commission and Tuesday’s proposal that effectively revokes the town’s sale of the utility.

“We feel pretty comfortable with the lead with 100 percent of precincts reporting,” Osei said Wednesday. “Some provisional and military [ballots are] left, but it should be impossible for those to cover the gap.”

“Next in Towamencin is making sure that the Board of Supervisors follow the charter and exit the contract that they are no longer able to complete,” he said. He added citizens across Pennsylvania will “keep monitoring these sales ..and offer advice to communities that want to fight this.”

Following the proposed sale, Osei said that outraged residents “successfully collected enough signatures to initiate a government study commission question and election that appeared on the November 2022 general election ballot.” The ballot question passed, with members of NOPE winning all seven seats on the commission.

Following public meetings, a draft report from the commission recommended the home rule charter’s inclusion on Tuesday’s primary ballot. The home rule charter will “prohibit the sale or long-term lease of potable water, wastewater, and stormwater systems to nongovernmental entities,” according to the commission’s report. It will also modify local transparency rules and referendum procedures.

Osei said throughout the controversy, the town board of supervisors transferred the sewer asset purchase agreement from NextEra to American Water.

Kara Rahn, a spokeswoman for American Water, did not respond to a query about the vote on Wednesday. Rahn earlier confirmed the company “agreed to assume the obligations under the Towamencin asset purchase agreement on March 23, 2023, after the Board of Supervisors’ public vote on the matter.” The sale was valued at $104 million.

“We do not have any comment on the ballot initiative seeking to change the township’s form of government in the future,” Rahn said.

Towamencin residents for months protested against the proposed sale, one of many transfers of public water systems to private controllers in Pennsylvania in recent years.

Among concerns that drove the backlash to the sewer sale, the commission found the transfer “could cost Towamencin ratepayers about $9 million or more every year in sewer rates in excess of operation and maintenance.”

“That would dwarf the stated $3.5 million a year benefit of having a one-time cash infusion,” the report said, also claiming that “investor-owned wastewater utilities consistently charge double to triple rates as well as having more harsh rate hikes than municipally owned systems.”

Though the charter will outlaw the sale of the water system to private companies, the commission suggested that the new charter still “allow for a lease with a non-governmental entity,” albeit only “for a period of no longer than two years.”

Osei previously told DVJournal that he got involved with the NOPE effort “first and foremost because Towamencin is where I grew up, and I did not want to see my friends and family sold out to some big utility company.”

“The more I read about water/sewer privatization, and specifically the ‘fair market’ valuation method Pennsylvania uses, the less I thought it was a good idea and wanted to make sure the people of Towamencin knew what was going on before they eventually get the bill a few years later,” he said.

Pennsylvania has recently seen a frenzy of sewer system buyouts by private groups. The state legislature in 2016 passed the controversial Act 12, which modified the state’s rules for the valuation and purchase of municipal water systems, allowing private concerns to buy more of them.

Osei said the main purpose of the home rule question on Tuesday’s ballot was to end any talks of selling the township’s sewer system.

“The primary goal of passing this charter is to stop the sewer sale and any future attempted sale,” he said.

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Kofi Osei Leads a Successful Home Rule Charter Effort in Towamencin

Kofi Osei, one of a slate of candidates from Towamencin NOPE (Neighbors Opposing Privatization Efforts), led the successful effort for voters to approve a Government Study Commission in Towamencin to recommend whether the township should adopt a “home rule” charter.

NOPE opposed the sale of the township’s sewers.

Towamencin NOPE is a group of Towamencin residents who opposed the sale of the sewer system. Members are Democrats, Independents, and Republicans, who worked together towards a shared vision of keeping control of the sewer system and sewer rates.

While affiliated with other local, grass-roots NOPE groups in Bucks County, Conshohocken, and Norristown that share the same ideas and values, Towamencin citizens are in charge of Towamencin NOPE.

“I was looking through the Township website to find out what our trial plan was like and noticed that we were exploring sewer monetization,” Osei said. “I have read about what had happened in other municipalities and reached out to David McMahon, who started the first NOPE group in Norristown.”

McMahon and Osei are both members of the Buxmont Branch of the Democratic Socialists of America. Osei has been in Towamencin for 26 years and many of his friends and family are still around.

“I wanted to get involved first and foremost because Towamencin is where I grew up, and I did not want to see my friends and family sold out to some big utility company,” Osei added. “The more I read about water/sewer privatization, and specifically the ‘fair market’ valuation method PA uses, the less I thought it was a good idea and wanted to make sure the people of Towamencin knew what was going on before they eventually get the bill a few years later.”

Osei, 29, one of seven individuals, will serve on the Government Study Commission, which evaluates how well-run the local government is and solicit feedback from residents.

Before promoting the commission, Osei went to township meetings for a year and was appalled that a governing body could so blatantly ignore facts and constituent opinion on such a huge decision. Osei wanted to make a charter where that would never happen again.

“I believe home rule has the potential to stop the sewer sale. I do not see any merits in fully privatizing water/wastewater utilities. I believe a charter precluding the township from selling such utilities would be the best,” Osei said. “Some other municipal charters in other states have similar privatization bans. Besides the sewer sale, Pennsylvania has very weak citizen provision, and the only way to get a broad referendum right in PA is to have a home rule charter that gives citizens that right.

“If the government study commission writes a charter that stops the sewer sale and adds referendum options, I hope Towamencin voters will be responsive in a future election,” Osei added.

In other services to the community, Osei was involved in the KEY club at his high school, where he volunteered for many events held in the area.

Osei completed his undergraduate degree in Computational and Applied Mathematics from West Chester and works as an actuarial analyst in health insurance. While Osei was not politically active before NOPE, he hopes to stay involved locally.

“I have no strong plans currently. This non-partisan, issue-focused, and hyper-local type of politics has been much more enjoyable than a lot of the partisan stuff at the state/federal end,” Osei said. “I perceive a need for the General Assembly to reform our utility laws, especially with how messy the Chester Water Authority and DELCORA situations are.”

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BECKER: Home Rule for Towamencin? Not So Fast….

There is a group of people who are against the sale of the Towamencin sewer system.

They are promoting a complete change in our form of government, hoping they will be able to change how this decision was made.

While I understand that not everyone agrees with all decisions made by local government, residents should be aware of some of the negatives of Home Rule.

Second Class Townships, such as Towamencin, have limits on taxing set by Pennsylvania code. However, it is my understanding that home-rule municipalities are only subject to a few limitations on the rates of taxation imposed upon residents including earned income taxes. In Pennsylvania, the highest personal earned income tax rate municipalities have home rule charters. Home Rule also allows greater influence by private interest groups seeking to influence public policy.

Residents should also be aware of the law and the guidance put out by the Department of Community and Economic Development in 2020. If the referendum passes it would create a Government Study Commission. There would then have to be public hearings as well as multiple Commission meetings, the drafting of a new charter, and a complete report, followed by a two-month period of public review. This would be remarkably like a constitutional convention.

Completely changing our form of government is not the answer. If residents do not like the decisions made, they can vote for change by electing new supervisors.

Those of us who are running under “Towamencin Residents United Serving Towamencin” (TRUST) are committed to keeping Towamencin Township a wonderful place to live, work and raise a family, especially now during these uncertain times.

Douglas Kile, Connie Brown, Jeffrey K Baer, Richard Todd Fisher, Amy Tarlo, Michael E. Main, and Nancy J. Becker are running for the Government Study Commission under the Township Residents United Serving Towamencin (“TRUST”), to ensure all voices are heard and all issues addressed. We are not motivated by one political issue and will take an honest look at the charter to ensure that any changes made are best for the long-term well-being of Towamencin and all its residents.

When you vote on November 8, remember why you moved to Towamencin or continue to stay here. We have amazing open spaces, parks, farms, and wonderful housing communities.

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FERGUSON: Towamencin Officials Presented Fishy Numbers to Public to Push Sewer Sale

The Towamencin Board of Supervisors has voted 4-1 to sell its sewer system to NextEra Energy for over $115 million. It is yet another example of municipal officials grabbing a large sum of “free money” offered by Big Water despite significant citizen objections. A good summary of the actions leading to the sale can be found here.

We attended the April 20 public meeting and concluded it was essentially a sham meeting. Its purpose was to check off the box next to “public input completed.” The supervisors had already made up their minds. One board member was obviously a dominant personality driving hard for the sale. As noted below, critical information was withheld limiting the public’s ability to ask relevant questions. Public comments were unilaterally rejected and the tone of the meeting became almost combative.

Towamencin “hired” a financial consulting firm, PFM, to advise them on the sale. However, PFM does not get paid unless there is a sale. A major part of the payment is a percentage of the sale. Clearly, it is not an objective, disinterested party.  Are you surprised that its recommendation is to sell to the highest bidder? PFM actually makes a disclaimer from any liability even if it is negligent.

The key question is whether the citizens of Towamencin got a good deal or did their representatives sell them out. That question cannot be definitively answered without more information that the township has not, and apparently will not provide. However, there is considerable room for doubt.

PFM presented cost data at the April public meeting showing a $400 a year benefit for each household if the system were sold. However, that information was not available until the night of the meeting. There was no time to analyze the data. Subsequent review raises a host of questions about PFM’s analysis:

  1. If the system is sold, township mortgage payments would go down by $2.2 million a year. But if the system is NOT sold, real estate taxes are forecast to go up by $6 million a year.  Why would $6  million yearly in new taxes be needed to offset the $2.2 million?  That issue alone could wipe out any supposed benefit.
  2. Another huge assumption is that the sewer rate increase forecast by the buyer is correct.  However, the buyer strongly notes that the forecast is “nonbinding.” The real answer depends on how much of the purchase price goes into the “rate base” that determines allowable profits. No information is provided here.  Could the rate forecast be a low ball estimate to facilitate the sale? That is a common ploy used by buyers. One thing is certain: the company will  try to get the rate base as high as possible. Each $10 million increase would raise sewer bills by about $120 a year. That supposed $400 annual savings could shrink considerably.
  3. If the sewer system is NOT sold, sewer rates are forecast to go up $4.4 million a year–about an 80 percent increase. The system generates cash, so why would such an increase be needed? A likely answer is capital upgrades for the system. Thirty million dollars was suggested at the meeting. Outrageous claims of future investments are another common ploy used to justify municipalities selling their water systems. So, the $30 million is a dubious number. But let’s assume it is accurate. The township could finance that capital for an annual mortgage payment of $1.1 million. So what is the other $3.3 million going for? It strongly looks like a large skew favoring the sale.
  4. So, if not selling the system requires a $30 million new investment, how much new investment is included in the buyers’ estimate? No information is provided here, but the buyer’s rate forecast implies little or no additional capital. That would make the rate comparisons totally bogus–it’s apples and oranges. But, again, it significantly skews the data in favor of the sale.
  5. If the system is not sold, township debt goes up by $15 million and debt service goes up by $2.3 million a year. On a 20-year bond that would be an interest rate of over 14 percent, which is absurdly high. A more realistic cost is $1.1 million yearly. Something does not smell right here.  But, it results in another $1.2 million dollars skewed in favor of the sale.
  6. After picking a winning bid, it is customary to do in-depth due diligence on the winning bid. There is no evidence that this was done.

We conclude it is highly probable that this is a bad deal for Towamencin citizens.  If it was a good deal, all the details of the analysis should have been made public ahead of the decision.  The citizens of Towamencin deserve better than they are getting.


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Despite Opposition From Residents, Towamencin Sells Its Sewer System

Towamencin residents opposed to the sale of the township’s sewer system to a private company are continuing to fight.

Township supervisors voted 4-1 on May 25 to sell the sewer system to NextEra Water for $115 million. Supervisors cited various financial burdens the township faces as a reason for the sale, in an editorial in North Penn Now.

“In looking at options to meet these financial challenges, we noted that other local municipalities have sold their sanitary sewer systems to private operators, such as PA American Water or Aqua America. In speaking to the elected officials and staff of these municipalities, they were generally pleased with the results of selling their systems, so we felt that we had a fiduciary responsibility to see if this could be a viable option to help us meet our projected future needs as a community,” the supervisors wrote.

NOPE, a group of Towamencin residents who fought the sale, is continuing to try to stop the deal from being finalized. On its Facebook page, NOPE leader Kofi Osei said the group will go to the state Public Utilities Commission to object and also try to have Towamencin residents adopt a new charter.

However, if the PUC approves the deal, some say residents are likely to pay more.

“These residents have already paid for this once and now they’re going to pay for it again. It’s absurd,” said attorney Frank Catania, who represents the Chester Water Authority and Southwestern Delaware County Municipal Authority.

The Pennsylvania legislature legalized these types of purchases in 2016 via Act 12. Since then, utility companies have been convincing towns and authorities to sell their water and sewer infrastructure.

“And the current legislature hasn’t corrected it,” said Catania. “It really hurts ratepayers. It doesn’t give them any say at all…The legislature in 2016 created a feeding frenzy, which is still going on.”

“This sort of thing continues until the ratepayers look for ways to hold the supervisors personally responsible for these losses,” said Catania. “What is basically happening is the supervisors are getting money for pet projects of theirs, and the ratepayers have to pay without having a say in it. Until the residents start to hold the supervisors personally responsible for the problems they’re creating, this will continue.”

“What they really need to do is explore the possibility of a surcharge action against them,” he said. “That is where you can hold an elected official responsible if the township has lost money. It’s not a widely used area of the law…there are laws on the books that can be applied in this situation. The ratepayers have to pay for a borrowing the supervisors have made forever. They never get to pay it off.”

“The ratepayers get hurt badly,” said Catania. “There’s no grace period.” In a recent Public Utilities Commission (PUC) case regarding Willistown, an administrative law judge “called those rate freezes ‘political theater.’ That’s how they look at it.”

“Until people start to address the problem, the supervisors who vote for these things, and either get them removed or surcharged financially, it’s going to keep going on.

“This is the only kind of transaction where the buyer and the seller are both trying to get the highest price,” said Catania. “Because they don’t have to pay for it. The buyer will get all the money back from increased rates…Who borrows money to get paid back permanently over many generations?”

As for the Towamencin supervisors who voted to sell the sewer system, they are “financially illiterate,” he said.

Meanwhile, a May 31 letter from the Pennsylvania Municipal Authorities Association, Region One that includes Bucks, Chester, Delaware, Montgomery, and Philadelphia Counties, tells municipalities it opposes these sales.

“The customer pays for the original installations and capacity in their mortgage. The customer then pays for the system again as the private entities recover all of their acquisition expenses – plus profits, by raising customer rates,” the letter reads.

“However, the pain does not stop there, since even after paying for the infrastructure twice, the increased rates imposed upon the customers continue and typically will rise every few years – after all, the money-making machine runs in perpetuity!

“Meanwhile, the funds received by the governmental entity selling your systems will eventually be spent – resulting in unfunded programs and employees hired with the temporary cash. This will require another tax increase to fill the void. The bottom line is that the seller grabs the money, and the customer is left behind to pay both higher water and sewer bills, and higher taxes.”

Not surprisingly, a utility company spokesperson had a different view.

“We understand residents have questions about future rates,” said Steve Stengel, spokesman NextEra Water. “What we know is that under our plan, which was approved by the board of supervisors, we proposed that rates be frozen for two years. Future rates will be subject to the review and approval of the Pennsylvania Public Utility Commission and it is impossible to speculate on what they will be five or ten years into the future. It is also important for township residents to understand that we are committed to meeting the highest standards for the sewer system and providing the highest quality of service to community residents and businesses.”

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