CHESTER >> City Council and the Chester Water Authority have agreed to negotiations to resolve disagreements between the parties that have grown since May 2017, when CWA received an unsolicited offer from Aqua Pennsylvania to be purchased for $250 million.
City Council passed a resolution at its regular meeting Wednesday night authorizing the execution of a Mutual Letter of Intent between the city and the authority. The CWA Board of Directors approved the letter at its regular meeting Thursday.
Controversy surrounding the May 2017 offer grew over the course of last year, with ratepayers from Delaware and Chester counties voicing opposition to a sale at standing-room-only CWA meetings, municipalities passing resolutions opposing the sale, and still-unanswered questions of what role outside parties played in initiating the offer.
The preamble to the city’s resolution summarizes a key disagreement between the city and CWA: The city’s position that “because the city was the incorporator of the Chester Water Authority, the city can unilaterally terminate the authority’s existence and/or unilaterally acquire any project of the authority.”
The Letter of Intent states the two parties are “interested in amicably resolving their respective positions through a negotiated resolution rather than … contested litigation between them.”
“With all the outside people … making suggestions about CWA’s future and actions the city and authority should take regarding each other, we thought it best to talk directly,” said CWA Solicitor Francis Catania. Chester City Solicitor Ken Schuster could not be reached for comment.
The letter states that the two parties will immediately start negotiations towards a Definitive Agreement with a Dec. 31 deadline, unless both agree to an extension. The city will not take any action on the rights it claims to dissolve the authority or interfere with its actions, and neither party will negotiate or contact any third party regarding transfer of any assets owned or managed by CWA without authorization of the other party.
In exchange for agreeing to the above conditions, the two will negotiate toward the definitive agreement containing provisions which include allowing CWA customers and assets within Chester (a proposed city division) to be administered and operated independent of customers and assets outside of the city (a new western division).
CWA serves 17 other Delaware County municipalities and 16 Chester County municipalities. It is currently divided into eastern and western divisions, with the dividing line at its tank farms in the Village Green section of Aston Township.
The letter states the purpose of the new city and western divisions would be to “take advantage of loan, grant, and in-kind assistance opportunities and programs with the federal government, state government and non-profit community-oriented organizations which programs would be otherwise unavailable to the city.”
“What we’ve agreed to talk about is treating the city as if it was an independent entity without making it an independent entity,” said Catania. “These are accounting changes.”
“We have significant amount of customers that are at or below the poverty line in the city, and there are special federal programs administered by the state for water infrastructure,” he said. Should the authority apply for such programs now – with the current eastern and western administrative divisions in place – the income data for Chester ratepayers would be skewed by the wealthier municipalities in the eastern division.
“What underlies under the conservation is protecting the ratepayers,” Catania said. “The city wants to protect its residents and we want to protect the ratepayers across the entire system.”
In a statement provided to the Times, Aqua Pennsylvania said it “respects the process the Authority and the City are taking. Should the authority and, or the City conclude that they are interested in selling their assets, Aqua Pennsylvania will glad to partake in the process.”
A representative from Aqua was in attendance at Thursday’s CWA meeting, according to Catania, whom he described as a “copious note-taker.”
The current controversy began with last year’s May 8 unsolicited offer, which the CWA board unanimously rejected at its next regular meeting. At that time it also approved a study to determine if the sale would be in the best interest of its 42,000 customers. Based on the results of that study received in August, the board voted 8-1 at its September meeting that it was not in the customers’ best interest to sell to a for-profit corporation.
The circumstances of the debate became less cut-and-dry in fall 2017. Catania had been questioning why the financial oversight group for Chester, Econsult, was considering a sale of the CWA more than a year before Aqua made its bid. Econsult was hired by the state Department of Community and Economic Development to draft Chester’s Act 47 Recovery Plan in August 2016. The plan requires the city to eliminate its budget deficient and address its funding deficit by May 2018. If the city can provide a sound fiscal plan for exiting Act 47 by May, then the deadline may be extended to 2021, otherwise, the city will enter receivership.
Right to Know requests filed by the authority produced redacted (blacked out) documents from the Department of Community and Economic Development that appeared to show an Aqua American representative was in discussions with Chester’s Act 47 consultant before the May 2017 unsolicited bid (requests are still on appeal to produce the full documents).
One letter from an attorney to Chester’s solicitor indicted the city should stake its claim that it is entitled to a “significant portion” of the proceeds of any sale, and that the Act 47 Recovery team would be available to assist with a four-step plan to gain a seat at the table during discussions.
In an Oct. 26 letter to CWA Board Chair Cynthia Leitzell, Chester Mayor Thaddeus Kirkland stated the city had the right to “reclaim and transfer operation of the authority’s assets” and to “dissolve the authority.” Leitzell responded with a Nov. 3 stating the city did not have the ability to dissolve the authority, based on CWA no longer being an asset of the city, but rather of ratepayers, and amendments to the state Municipal Authorities Act in 2012 which removed sole control from Chester and created a nine-member board equally representing the city, remaining Delaware County municipalities, and Chester County municipalities.
Kirkland said in November that he was neither for nor against a sale. Catania said at the time that Kirkland had never once raised the idea of a sale with him and believed “absolutely” that the state is the one actively pursuing selling the CWA as a remedy for Chester’s budget woes.