SAVE THE RESERVOIR
Save Octoraro Reservoir
Our small-town way of life is under attack. Our much loved Octoraro Reservoir that we use for boating, fishing, hiking, hunting and more will be lost without your help. Chester Water Authority (CWA) is under attack in a hostile corporate takeover attempt by the company formerly known as Aqua America (now being re-branded as Essential Utilities, Inc.).
As a community, we have everything to lose and nothing to gain by this sale. The sale will result in loss of the Octoraro reservoir, loss of open space, higher rates for public water, and loss of control of our water source. The company formerly known as Aqua America is a for-profit, publicly traded corporation; it’s beholden to shareholders and profits. CWA is a non-profit municipal authority; it’s beholden to clean water and us!
With your help, we will stop the sale.
Together, we will SAVE THE RESERVOIR!
Look Who's in Hot Water!
On March 8, 2023, Seeking Alpha* put out an explosive article based on a forensic research report on Essential Utilities, Inc. (NYSE: NYSE:WTRG) by Spruce Point Capital Management. Spruce Point Capital Management, LLC is a New York based investment manager focused on short-selling, value, and special situation investment opportunities. The firm conducts in depth fundamental research and takes an activist approach to investing.
Below is a quote from the summary of the Spruce Point report described in the article:
- "After conducting a forensic review of Essential Utilities, Inc. (NYSE: WTRG or “the Company”), Spruce Point has grave concerns about the efficacy of its business model, the accuracy of its financial reporting, and its ability to meet financial obligations and targets."
- "WTRG, formerly named Philadelphia Suburban Corp. and Aqua America, Inc., is an aggressively managed roll-up of water, wastewater and natural gas assets that is highly dependent on external capital to sustain itself."
- "Based on our analysis of over 30 years of financial data and public information, we question the public benefit of WTRG’s business model, and believe it is a vehicle for insider enrichment that operates akin to a Peter-to-Peter-to-Paul scheme whereby money from new and current investors is used to pay existing investors a highly promoted dividend."
- "We have grave concerns about the accuracy of its financial reporting and growing financial stress given its recent $4.3 billion levered acquisition of Peoples to diversify into natural gas."
- "Based on documented history of a Board member referencing the current Chairman & CEO as “disingenuous” and evidence that the Audit Chairman once advised a company that filed for bankruptcy and was described by the bankruptcy trustee in court documents as fraudulent and with “many of the characteristics of a Ponzi scheme**,” we do not believe the Board is best equipped to look after shareholder interests."
- "Investors should also be on further red alert that WTRG’s stock was once promoted by a notorious firm that itself ran a Ponzi scheme."
**These are direct quotes from the report, not our words.
*Seeking Alpha is the world’s largest investing community, Note that Seeking Alpha's investors connect daily to discover and share new investing ideas, discuss the latest news, debate the merits of stocks, and make informed investment decisions
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The Chester Water Authority (CWA) is an award-winning, municipal authority dating back over 150 years and serves over 200,000 people (about 49,000 customers) in Delaware and Chester Counties. The CWA is run by a nine-member board comprised of 3 members from Chester City, 3 from the surrounding Delaware County, and 3 from Chester County. The CWA has an outstanding reputation as a well-managed and well-maintained municipal authority.
Only 19% of CWA’s customer base is in the city of Chester; 81% of customers are located elsewhere in Delaware and Chester counties.
In addition the CWA has won many awards, including:
- Game Changer Award from the United Way of Greater Philadelphia and Southern New Jersey
- The Chester Water Authority's (CWA) Octoraro treatment plant has been selected to receive the prestigious Area Wide Optimization Program (AWOP) Award for the 8th consecutive year
- Excellence in Water Treatment Award from Partnership for Safe Water
- George Warren Fuller Award from the American Water Works Association
The CWA board has faithfully looked out for its ratepayers, unanimously rejecting Aqua's unsolicited offer in 2017. The board continues to advocate for ratepayers in keeping CWA a public, non-profit, utility.
Why Would Aqua Want to Buy CWA?
It’s simple. Money. Land. And ultimately Power. Make no mistake about it. Aqua America (Essential Utilities) is a Water Profiteer. All across the United Sates, communities, like ours, are fighting to reclaim their water rights by attempting to forcibly remove Aqua America. We are lucky. We have the opportunity to Save CWA and Save Ourselves NOW before it’s too late!
- CWA owns over 2000 acres of valuable land assets that can be sold for development. Say goodbye to the Octoraro Reservoir and open space.
- As ratepayers, we are built-in company equity. Once the CWA is purchased, raising our rates means raising Aqua’s profits.
- Aqua’s goal is to own all the pipes in our Pennsylvania ground. They have made deals to own: water, sewer, and natural gas pipes.
Consequences of a Sale
Loss of Access to the Octoraro Reservoir
CWA owns the two-billion-gallon Octoraro Reservoir. From fishing and hiking to boating and kayaking, the reservoir is free and open to the community for enjoyment and recreation. As with its other acquisitions such as the Springton Reservoir in Delaware County, it can be expected that Aqua America will fence-off the reservoir from the community and prohibit recreational activities.
Loss of Open Space
CWA has significant land holdings. They maintain over 2000 acres of land that protects our water source and watershed. This untouched land creates our community’s bucolic setting that is much loved and sought after. It is also the home to wildlife, including bald eagles, herons, wild turkeys and more. Based on its well-documented history, Aqua America will likely parcel and sell these land holdings for private homes and commercial businesses.
Rates Will Increase
In every acquisition it has made, Aqua America hikes up water bills through rapid-fire rate increases and infrastructure surcharges.
Loss of Power Over Our Water
Probably the ultimate loss is the community’s loss over its water. Pure, clean water is a limited, precious resource that is guaranteed to Pennsylvanians by our state constitution. As trustee of these natural resources, our government should preserve them and not sell them to profit-driven companies.
Timeline of the Attempted Hostile Takeover
Passage of Act 12
In 2016, Pennsylvania lawmakers in Harrisburg passed a piece of legislation, Act 12 (attached to House Bill 1326), that resulted in two consequences.
Private companies can offer to buy municipal authorities for more than they are worth.
Poorer communities are tempted to accept high dollar bids.
Municipal authorities no longer have to be in financial or operational distress to be purchased by private companies.
CWA is suddenly a target. It has never been in distress in its 150+ year history.
Aqua's Unsolicited Bid
In 2017, just a year after Act 12 passed, Aqua made a $320M unsolicited bid to purchase the CWA. The CWA board unanimously rejected the offer. The board determined that there was no benefit to ratepayers from the sale. If CWA was sold, rates would go up and the public would lose access to the Octoraro Reservoir——a lose-lose situation. The CWA board's decision to reject this bid has saved ratepayers over $200M.
CWA's Attempts to Protect Our Water and Us
The City of Chester is in financial distress. In an attempt to protect CWA from future hostile takeover bids by private corporations and to support the City of Chester, CWA offered the city a one-time $60M payment in exchange for placing the authority in a trust for 40 years. The City of Chester never responded to this offer.
Aqua Sues CWA
Aqua buys water from CWA. As a corporate ratepayer, Aqua sued CWA. They did not want CWA to bail out the City of Chester with the $60M offer making the city solvent and less susceptible to accepting a corporate buyout.
Note: In court proceedings between the City of Chester and CWA, the City of Chester is supported by Aqua's legal counsel.
City of Chester in Critical Financial Distress
In February, the City of Chester put out a Request for Proposals for the acquisition of the assets of CWA, despite CWA not being an asset of the City. The City receives 3 bids: Aqua Pennsylvania, Pennsylvania American Water, and CWA (repeating its offer from 2019).
COVID-19 struck and the City of Chester subsequently lost millions of dollars in revenue when the casino closed. On April 13, Governor Wolf placed the City of Chester into receivership with the Department of Community and Economic Development (DCED). CWA issued a statement regarding this declaration.
On April 24, Delaware County Common Pleas Court Judge Spiros Angelos issued an order indicating any sale of CWA assets must be approved not only by the city, but also by Chester and Delaware counties, where the bulk of CWA's customers live. The City of Chester has appealed that ruling. The case went up to the Commonwealth Court, who heard oral arguments in the case en banc (all members, instead of just one judge or a small group of judges) in November. We are awaiting their decision.
In June, Speaker of the PA House, Rep. Mike Turzai retired to go work for Essential Utilities.
Because of activism of CWA ratepayers, legislation was introduced to the PA House. HB 2597 was introduced by Rep. John Lawrence (PA 13) in July. HB 2746 was introduced by Rep. Christina Sappey (PA 158) in August. Both of these bills were referred to the Consumer Affairs Committee. HB 2597 was given a hearing in September. Statements in the hearing were given by Cynthia Leitzell, CWA Chairperson, and Karen Versuk, director of operations for Penn Township. Both bills died in committee without ever being brought up for a vote at the end of the 2020 legislative session.
New Legislation Introduced
Rep. Christina Sappey (PA-158) reintroduced her bill in the new legislative session (now named HB 144) and Rep. John Lawrence (PA-13) has re-introduced his bill (now HB 97). Both have again been referred to the Consumer Affairs Committee. Sen. John Kane (SD-9) has introduced a companion bill to Rep. Sappey's bill in the PA senate, SB 452.
In April, the Supreme Court ruled in favor of CWA in the RTKL (Right-to-Know Law) case. The court declared that communications between DCED and third parties/consultants are not privileged and therefore they will have to reveal those documents to CWA. In May, a bi-partisan hearing co-chaired by Rep. Lawrence and Rep. Krueger drew attention to Section 1329 of Title 66 (better known as Act 12). Discussion surrounded whether this law should be amended to pertain only to distressed water systems, not healthy systems like CWA.
In September, the Commonwealth Court ruled that Chester City has the ability to dissolve CWA. The narrow ruling did not answer other questions about assets or ownership and returned the case to the Delaware County Court of Common Pleas to continue litigating those issues. CWA has appealed the Commonwealth Court decision to the PA Supreme Court. On September 29, Reps Kreuger and Lawrence introduced HB 1936 to Amend Act 12 to only pertain to distressed systems. The bill was referred to the Consumer Affairs Committee.
On Oct. 13, Chester City Council unanimously passed a resolution asking the Receiver to allow them to enter into an Asset Purchase Agreement with Aqua. CWA promptly sued City Council stating that it violated the Sunshine Act by not making the Asset Purchase Agreement available for public review and comment prior to the vote. CWA asked the court to honor the stay that is in place.
City of Chester Declares Bankruptcy
In February, through Right-to-Know (RTK) requests, CWA obtains a draft of the Asset Purchase Agreement (APA) that the DCED, Governor's Office, Chester Receiver, City of Chester and AQUA have been secretly negotiating since mid-2020. In the APA, there is NO mention of rate freezes or rate stability funds, NO mention of protecting the reservoir. Further RTK requests reveal email exchanges that the Governor's Office and DCED have a policy in place to attempt to sell the water and sewer assets of distressed communities in order to resolve pension debts. Also in February, Rep. John Lawrence confronts newly-appointed Acting DCED secretary, Neil Weaver, at a budget hearing.
In April, the PA Supreme Court decided to hear CWA's petition appeal. Oral arguments are scheduled for November 30.
In September, CWA submitted a letter to the Environmental Justice Advisory Board of the DEP requesting them to hold state-wide public hearings on water affordability, making the case for water justice because Big Water privatization deals disproportionally affect the lives of Black people and People of Color.
In November, the DCED-Appointed Receiver for the City of Chester submits an Amended Recovery Plan for the City of Chester, asking the Commonwealth Court to give him sole control over City Authorities. Two days later, the Receiver files for bankruptcy in federal court. This puts a stay on state cases, including the PA Supreme Court case that was scheduled for Nov 30. He also files a motion to have the stay lifted on the Commonwealth Court case ONLY (with the Amended Recovery Plan, which CWA is not a party to). This Robbery in Progress is a developing story.
Support for CWA from Community Leaders
"We appreciate and understand the concerns of many Chester County residents regarding any potential sale of the Chester Water Authority to a private water utility company. We agree that the sale of Chester Water Authority to a private water utility company is not in the best interest of the Authority nor its ratepayers – our businesses and residents. The County has taken an active role in the on-going litigation about this very issue and will fight to keep Chester Water Authority a public entity."
– Chester County Board of Commissioners
"We, the undersigned, as elected representatives of the citizens of the Borough of Oxford, are strongly opposed to the sale of the Chester Water Authority to a for-profit corporation.
Chester Water Authority, as a not-for-profit public authority, has a long history of providing water to the public at reasonable rates. We wish to have them continue to do so.
We value the Octoraro Reservoir as a recreational resource for the local area and do not want the public to lose access to it as a result of a sale to a private entity."
– Oxford Borough Council
"The Governor has taken a very disturbing position in this effort by Aqua PA to takeover the Chester Water Authority, under the guise of this having to do with the Act 47 distressed status of the City of Chester. The curious filing by your Southeast Regional Office suggests that the DEP is acting for the benefit of Aqua's share holders and not the CWA ratepayers or the general public.
This unprecedented effort to challenge the autonomy of a long standing municipal authority is part of a strategy for Aqua to monopolize the water and wastewater customer base for the broader region. We support privatization of systems in cases where municipal authorities desire to be sold, but not in this hostile takeover effort by the profit motivated Investor Owned Utility.
Many S.A.V.E. supporters live in the service area and benefit from the natural resources of the CWA. We strongly object to this hostile takeover of the CWA."
– Blair Fleischmann, Executive Director of S.A.V.E.
"We, the Officer and Members of the Longwood Fire Company, strongly request the Chester Water Authority (CWA) remain a municipal authority and not be sold to a for-profit company. CWA is a valuable asset to our fire company in the Chester County communities. CWA is and always has been a good neighbor, providing a high quality of service and continuous support to our fire company.
The CWA leadership and employees are very responsive to the needs of our organization and extremely responsive when maintenance or repairs are need."
– AJ McCarthy, Fire Chief, Longwood Fire Company
"We would like to express our opposition to the sale of CWA. Chester Water currently owns approximately 750 acres of open ground in Colerain Township including the Boat Landing on Spruce Grove Road.
If Aqua would buy and live up to their current standard of fencing off and closing public access, this would have a traumatic effect on our community."
– Colerain Township Supervisors
"We support the unanimous decision of the Board of Directors of the Chester Water Authority to reject the proposal of Aqua America purchase CWA 's assets and customers.
We request that the CWA Board not sell its customers and assets to a for profit company.
We request that the Board continue to protect our Township residents and businesses by putting the interests of the ratepayers first when making decisions about the Authority's operations and future."
– Lower Chichester Township Board of Commissioners
Resolutions and Letters of Support
Chester County Commissioners
East Marlborough Township
East Nottingham Township
Borough of Kennett Square
London Grove Township
London Grove Township Municipal Authority
Lower Oxford Township
New London Township
Upper Oxford Township
West Nottingham Township
Township of Aston
Chadds Ford Township
Township of Chester
Township of Concord
Township of Lower Chichester
Borough of Marcus Hook
Borough of Parkside
Borough of Trainer
Upper Chichester Township
Carolyn Comitta (D) former 156th Legislative
Bryan Cutler (R) 100th Legislative
Brian Kirkland (D) 159th Legislative
Leanne Krueger (D) 161st Legislative
John Lawrence (R) 13th Legislative
Chris Quinn (R) 168th Legislative
Christina Sappey (D) 158th Legislative
Craig Williams (R) 160th Legislative
Avondale Fire Company
Backcountry Hunters and Anglers - PA Chapter
Cochranville Fire Company
Conservation Voters of PA
Elk Creeks Watershed Association
Kennett Fire Company
Longwood Fire Company
Oxford Region Planning Committee
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from the Pennsylvania Constitution,
Article I, Section 27:
"The people have a right to clean air, pure water, and to the preservation of the natural, scenic, historic and esthetic values of the environment. Pennsylvania's public natural resources are the common property of all the people, including generations yet to come. As trustee of these resources, the Commonwealth shall conserve and maintain them for the benefit of all the people."