Receiver questions feasibility of publicly owned water system for Chester

Thanks for Reading! Don't miss this deal


Get Standard Digital access to enjoy this article and more

The city Receiver’s Office questioned the feasibility of keeping the Chester Water Authority in public hands as CWA officials questioned the motives of the Receiver.

During the Municipal Financial Recovery Advisory Committee meeting, Vijay Kapoor presented a report entitled, “Water System Monetization Evaluation Progress,” which outlined concerns the Receiver has about unanswered questions associated with the Chester Water Authority and its operations.

In response, the Chester Water Authority Solicitor Frank Catania issued a three-page letter denying the authority is making money off Chester ratepayers, explaining where information about the CWA can be found, among other issues.

In May 2017, Aqua made an unsolicited $250 million bid for the Chester Water Authority’s assets, which CWA rejected. In January 2019, the CWA approved a 10 percent rate increase to provide the $60.2 million to Chester in exchange for the city agreeing not to terminate or acquire any CWA project for 40 years with the assets being placed in a trust. Three months later, Aqua sued CWA and Chester, saying it would cost their customers $75,000 with no benefit to them. All of these matters have been mired in lawsuits for years now.

In his presentation, Kapoor said the estimated revenue coming from CWA city ratepayers in 2019 was $10 million and the operating expense for those same ratepayers in that year was $3.5 million.

“So, the question that we have here is assuming that these numbers are reasonable … where’s all the other city ratepayer money going?” Kapoor asked. “Where’s it going now? … Are our city ratepayers right now being overcharged or are they possibly subsidizing suburban ratepayers?”

Kapoor said the Chester Water Authority’s rates are not necessarily subject to the state oversight provided by the Public Utility Commission.

“You don’t really have third parties looking in there trying to figure out what the rates are,” he said during the presentation, adding that CWA has denied that Chester ratepayers are being overcharged.

Catania referenced the 2019 lawsuit filed against CWA and the city by Aqua/Essential Utilities seeking to stop a settlement between the two “on the alleged basis that CWA providing funds to the City would discriminate against suburban ratepayers.”

Kapoor told the committee that they had been trying to get information from the Chester Water Authority to evaluate their bid and to try to determine if the system could remain in public hands.

The presentation focused on the time and actions when the Chester Water Authority was offering Chester $60 million to prevent a sale to a private owner. Part of that would have included dividing operations into two divisions – a City division covering Chester ratepayers and a West Division covering Delaware County ratepayers not in Chester and Chester County ratepayers.

As part of that, the city was planning to hire Corvias to handle the Chester division management for a 30-year agreement funded by the city ratepayers.

Kapoor said that the Receiver has been unable to talk to Corvias about their discussions in these matters.

He spoke to the difficulty the Receiver faced in trying to obtain basic information about Chester Water Authority data such as future capital improvement plans; rate projections; number of equivalent dwelling units broken down by residential, commercial, industrial, fire protection and other utilities; total annual billed flow in gallons for these customers; bank loans; and collective bargaining units with unions.

Kapoor said the Receiver’s office filed a Right-to-Know request in late 2020 for this information so that PFM Financial Advisors could evaluate and compare the bids received by the city to purchase the CWA assets.

Kapoor said the CWA denied the Receiver’s request, citing 14 reasons, including records do not exist and disclosure endangers safety.

“In our view, this is a little bit of overkill here for basic information,” he said.

Kapoor said this information would allow the Receiver team the ability to evaluate the bid and see if it can remain in public hands while also shedding light on whether Chester residents are being overcharged.

“At the end of the day, this may not be feasible,” Kapoor said. “This may not be feasible at all but it’s out there and we feel there is a need to actually vet this.”

Catania pointed to the availability of information on the Electronic Municipal Market Access, providing trade activity, official statements, financial disclosures, including audits and more at https://emma.msrb.org/IssuerHomePage/Issuer?id=D40A91BBB92B5EA07479337F1CDD913B.

“Apparently, the Receiver’s staff and his colleagues at DCED have been unable to find, or more likely unwilling to acknowledge, this data for over a year and half,” Catania wrote, clarifying that the $60 million offered to Chester is a settlement to make cash available to the city, not a bid.

“CWA is the only entity other than the federal government that has stepped up to make such substantial funding available to the City,” he continued. “The Receiver’s employer, the Commonwealth, has a massive budget surplus yet has not made material sums available to the City. CWA’s revenues are invested back into its operations, for the benefit of all ratepayers. It does not need to pay dividends to shareholders, especially foreign investors.”

Catania said the Receiver seems to have a set focus.

“The Receiver and his team appear to be simply trying to look like they are trying to conduct ‘due diligence’ for what is a pre-determined attempt to sell the CWA to Aqua,” he said.

“There is a fairly straightforward option available to the Receiver if he is indeed acting in good faith concerning exploration of the spin-off of city operations: ask Chester residents if they would like, in addition to the $60 million in settlement funds, to spin off the city operations so that they are under the City’s control and any revenues from city ratepayers will be in the city’s control,” Catania continued, adding it is doubtful that would occur. “There appears to be no willingness whatsoever by the Commonwealth to allow the City any autonomy after decades of state control.”

Catania said CWA representatives met with the Receiver’s Office in September and followed with a written proposal, but were “stonewalled.”

Kapoor said,  “The Receiver’s team would simply like the opportunity to freely speak with a company that the CWA and the City engaged to develop a concept that could keep the CWA in public hands while at the same time providing the City with enough revenues to address its financial situation.  We’re perplexed that the CWA is still refusing to allow us to do so, even after we offered to have the CWA participate with us in those conversations.  Furthermore, the Receiver’s office has not made any assertions that the CWA is making some sort of windfall off of the City.  Based on assumptions in the concept document, we simply asked whether Chester residents are being charged an appropriate amount.”

View more on Delco Times