ASTON >> The Chester Water Authority Board of Directors has approved a resolution to enter a settlement with the City of Chester – that will include a 10 percent rate hike for its customers. The nine-member board unanimously voted for approval at a Thursday afternoon meeting in the Mirenda Center on the Neumann University campus. The settlement will now be voted on by ChesterCityCouncil. If passed by the city, it will go before the Delaware County Court of Common Pleas for approval, followed by any potential appeals.
If approved by both parties and the court, the settlement will conclude a 1 ½-year controversy regarding a potential sale of the authority to bolster Chester’s finances as the city struggles to to exit financially distressed status under state Act 47.
“This is not a perfect solution; it’s a practical solution,” CWA Solicitor Francis Catania said regarding the settlement terms, responding to a question during a 35-minute public comment period before the vote.
Approximately 10 people spoke during public comment out of about two to three dozen in attendance. Questions focused largely on the terms of the settlement and what alternatives may exist. Catania said the settlement would avoid a probable years-long period of litigation over whether the city, as the original incorporator of the authority, has the right to dissolve it, a precursor to a possible sale.
The settlement will last for a 40-year term and include a 10 percent rate increase on all CWA customers to fund a one-time payment to the city of $60,285,000 through a bond issuance. The bonds will not have an interest rate exceeding 6 percent or a final maturity date of more than 30 years. The rate increase will commence not later than 30 days after the closing of the bond and is not to exceed 10 percent due to the bond issuance.
As part of the settlement agreement, CWA assets will be transferred into a trust for 40 years.
In exchange, the city will not challenge any action “taken by the authority to protect and preserve its assets, and to benefit its ratepayers in accordance with the authority’s duties as true under Pennsylvania law…” The terms state that “nothing shall obligate the authority to issue the bonds in the event that litigation remains pending which involves a challenge to the rate increase referenced above.”
ShouldChesterCityCouncil pass a resolution to accept the settlement, Catania estimated a court date of “late spring, early summer” to begin the approval process by the county Court of Common Pleas.
The settlement is result of negotiations between the city and the authority that began inMarch 2018. According to a prior interview with Chester Mayor Thaddeus Kirkland, the city’s state-appointed Act 47 coordinators Econsult Solutions were brought into discussions shortly after the negotiations began. The key disagreement at the start of negotiations was whether the city, as the authority’s original incorporator, had the ability to dissolve and sell all or part of the authority to help alleviate its financially distressed status. Seventy eight percent ofCWA customers are located outside of the city in Delaware and Chester counties.
“I believe this what our citizens want – they want partnerships, and that’s what the city and Chester Water Authority have been working towards,” Kirkland said earlier this month. “I think our goals are the same.”
The negotiations were an effort to quell a controversy that began in May 2017 when CWA received an unsolicited offer from Aqua Pennsylvania to be purchased for $250 million, intensifying in November of that year when information was released showing contact betweenChester’sAct 47 coordinators’ contact and for- profit water companies. The communication regarded about potential monetization of the Chester Water Authority to relieve the city’s financial troubles. The series of Right to Know requests by Catania that revealed the information produced redacted (blacked out) documents, some heavily, further adding to the controversy.
Aqua Pennsylvania officials have since said they no longer are pursuing the company.
Chester Water Authority dates back to 1866, serving more than 42,000 customers impacting about 200,000 people in the city of Chester, in 17 of Delaware County’s 49 municipalities and in 16 of Chester County’s 73municipalities.