CHESTER – On Wednesday, Chester City Council unanimously voted to ask the city’s Receiver to approve a $410 million asset purchase agreement with Aqua for the assets of the Chester Water Authority.
“We’re looking at it in a financial way,” Chester Mayor Thaddeus Kirkland explained. “Financially, they have put together the best proposal. Financially, they are talking about $410 million.”
Aqua has agreed to give an additional $12 million to the city, regardless of the outcome of litigation. Kirkland said the city will receive these funds immediately upon Receiver approval of the asset purchase agreement.
“I want the community to know that we have not been sitting on our hands with this,” the mayor continued. “We have been studying it. We are serious about. We are going to do everything in our authority and our power to make sure that we do what’s best for the residents of the city of Chester. We live here as well and we want to do what’s best not only for our residents but for the future of Chester.”
After the vote, Chris Franklin, chairman and CEO of Essential Utilities, Aqua’s parent company, said, “Aqua was pleased to see the unanimously approved resolution at today’s Chester City Council meeting. “It has been over a year since Aqua responded to the city’s request for proposals regarding the assets of the Chester Water Authority, and while we understand the tasks that the Receiver must accomplish, we are pleased that the city is asking the Receiver to expeditiously approve the council’s request to enter into an asset purchase agreement with Aqua for the Chester Water Authority system.”
Referencing the Sept. 16 Commonwealth Court ruling putting the authority to determine the CWA’s assets in the city of Chester’s hands, Franklin continued: “(W)e are hopeful that the city and Aqua can now proceed with an agreement that will enable Aqua to acquire the system, deliver excellent water service to the families and businesses served by CWA, help resolve the city’s financial struggles, and philanthropically support the city and its residents.”
In addition, he reiterated Aqua’s commitment to retain all of of the CWA employees, to permanently maintain ongoing uses and access to the Octoraro Reservoir and to long-term rate stability for customers inside and outside of the city.
“We have never left any employee behind,” Franklin said of the company’s hundreds of acquisitions. “We would keep all of the employees and none of them would be let go.”
Regarding the rates, he reinforced the concept that a trust would be put in place to offset CWA ratepayers’ rates for a decade.
“I don’t know any other utility that’s telling people rates will be stable (for that period of time),” Franklin said, adding that Essential is working with the state Public Utility Commission to establish a fund for low-income residents.
Vijay Kapoor, chief of staff to the Receiver, offered remarks at the council meeting before the vote.
“The city is facing a severe pension fund crisis,” he said. “It has possibly four months’ worth of benefits left in the plan to pay the pensions for current retirees and future retirees. That is the worst in the state.”
There are only two ways to address this, Kapoor continued, adding that they are to deal with unaffordable benefits, which was not before council Wednesday, or to consider monetization.
“However, that does not necessarily mean that the water system needs to privatized,” Kapoor said, adding that the Receiver said he did not have a problem with the water system remaining in public hands if the city could receive a fair price for the system.
After the recent Commonwealth Court decision, the Receiver directed his team to do due diligence to determine whether the city could receive a fair price for the system while keeping it in public hands.
“I have not made a decision yet,” Kapoor quoted the Receiver. “I will continue to keep all options on the table.
“That is the position of the Receiver,” Kapoor continued. “That was the position of the Receiver on Sept. 23 and that continues to be the position of the Receiver.”
Kapoor said it was “absolutely false” that the Receiver has been secretly negotiating with Aqua/Essential for the past year while publicly denying that he is doing so and that he doesn’t care what the courts say or do.
He noted that he actually sent an email to CWA attorney Kevin Kent on Sunday morning to notify him about city council’s consideration of the resolution regarding the purchase agreement with Aqua.
Chester has been in Act 47 status since July 1995 and in April 2020, Gov. Tom Wolf declared a fiscal emergency for the city with Michael T. Doweary being appointed Receiver for the city on June 22, 2020.
CWA Solicitor Francis Catania said he was disappointed by city council’s action but not surprised as he questioned if the council members had actually seen the agreement prior to voting.
“I have great sympathy for the position that (the Pennsylvania Department of Community and Economic Development) has put the council in,” he said. “They are politically extorting the city to do these things. The DCED has been reining havoc on that city for 25 years.”
Catania blamed the Receiver with impacting the CWA’s ability to retain staff or borrow money and said Doweary himself would chose other options for Chester’s water.
“The Receiver is attempting to interfere in the operation of the authority,” he said. “The Receiver knows it’s a bad idea. It will make water unaffordable for the majority of people in the city of Chester.”
Of city council, Catania said, “I’m disappointed in their actions today but I understand why they had to do it.”
The saga of the Chester Water Authority has been years in the making.
In 2017, Aqua made an unsolicited bid to buy CWA for $320 million, which CWA rejected. On Jan. 24, 2019, CWA executed a declaration of trust, naming the authority as the settler and three of its board members as trustees with the intent to transfer the water system assets into this trust. Aqua and Chester challenged that in court with motions leading to the September Commonwealth Court decision.
In June 2019, Chester City issued a request for proposals to sell the system but due to litigation and out of caution, they returned the six unopened proposals to the bidders.
On Feb. 3, 2020, the Delaware County Court of Common Pleas ruled that the city could issue a request for proposals, provided that the sale of the system would be conditional to the resolution of any litigation. Nine days later, the city issued a second request for proposals.
In response to that request, Chester received three proposals – $410 million from Aqua America; $425 million from American Water; and $60 million from the CWA. The Aqua America proposal included an additional $12 million advance for the city, regardless of litigation outcome.
Wednesday’s resolution read, “(T)he City has determined that Aqua Pennsylvania Inc. … has submitted a bid that is in the best interest of the City and offers the greatest value to the City, as determined by the Mayor and City Council in consultation with the City’s financial advisor.”
Zulene Mayfield of Chester Residents Concerned for Quality Living was not in attendance but issued a statement afterwards, in part citing a concern about only 25 people allowed in the room and that only city residents were allowed public comment.
“Overall, you don’t sell out the asset that you have,” her statement read. “You don’t want the people that are not fiscally responsible with our government to make a decision like this. If anything, put it on a ballot and allow the people to vote. Let the community have a true voice. This is a temporary fix to a long-term problem. This sale would not be in the best interest to Chester, with higher rates and diminished quality.”
Relatedly, Pennsylvania House Speaker Bryan Cutler, R-100, of Lancaster, and state Rep. John Lawrence, R-13, of Chester/Lancaster counties, filed a Friend of the Court brief with the state Supreme Court last Friday asking it to review the Chester Water Authority v. Aqua Pennsylvania case.
Earlier this month, Lawrence and state Rep. Leanne Krueger, D-161 of Nether Providence, introduced H.B. 1936, a provision that would amend Section 1329 of the Public Utilities Law to prohibit the sale of municipal water or wastewater systems to private companies using the valuation procedure outlined there unless the system is in financial and/or operational distress. The bill has been referred to the House Consumer Affairs Committee.
The Chester Water Authority serves 41,000 customers, equating to more than 200,000 people, in Chester City, western Delaware County and parts of Chester County.
