‘Rain tax’ board members in bankrupt Chester received hundreds of thousands of illegal payments, a judge rules
A judge rule the stormwater authority's payments to board members were "outside the law."
Property owners in the bankrupt City of Chester have been unduly generous to the members of the so-called rain tax board who have received hundreds of thousands of dollars in illegal payments, a state court judge has found.
The Stormwater Authority of Chester, whose rates appear to be among the highest in the country, acted “outside the law” in paying the board — which now consists of nine members, including three elected officials, Judge Matthew S. Wolf concluded in rendering his decision on Friday.
The state-appointed bankruptcy receiver had argued that payments to the board never had been authorized by Chester’s government. Nor had any mention of such salaries appeared in the authority’s minutes.
The authority countered that it was not a municipal entity and, thus, was not subject to city ordinances.
Vijay Kapoor, who became the receiver on July 1, on Monday hailed the decision as a “victory” for ratepayers, many of whom have balked at paying the fees, derisively dubbed the “rain tax” by residents.
The authority has said it has been pouring the fees into reducing runoff and water pollution, along with other projects, in the flood-prone riverfront city of 33,500, where Chester Creek sloshed over last week.
The agency says that since it was created in 2016, “Chester has seen a tremendous reduction in flooding and road closings.”
Horace Strand, the former executive director who appointed the board, said Monday he was unaware of the decision and could not comment. The authority did not respond to an email request for comment.
Strand, who has had an acrimonious relationship with the receiver’s office and Mayor Stefan Roots, has said the authority was doing “great work,” adding that he had overseen $50 million in flood-control projects without “malfeasance.”
Said Roots, “As a resident of Chester, I have no idea what they’ve spent $50 million on.”
In a city where more than 30% of households live in poverty and that has the state’s second-highest wage taxes, an inordinate amount of the ratepayers’ money has gone to board members, Wolf found.
In 2023 and 2024, alone, the receiver’s office said in its court filing, board members were paid more than $250,000. It said that with the $16.50 monthly rates, it would have taken the fees of 721 property owners to pay the salaries. Livia Smith, the board chair, was being paid $26,400 annually, according to the filing.
The receiver’s office argued that the board members’ salaries must stop “not only because they are legally unauthorized, but also because of the corresponding impact they are having on city residents.“
Chester’s tax base has been evaporating since its industrial heydays of the World Wars. It now relies on a casino and an incinerator for about 20% of its $65 million annual budget.
The city has been in distressed status since 1995, in receivership since 2020, and in bankruptcy since November 2022, a rare distinction.
Of the nation‘s 35,000 municipalities, Chester is one of only about 30 that have filed for bankruptcy.
Under the receiver’s plans for the getting the city out of bankruptcy, the stormwater authority would be bundled with two other water services for sale to an entity that would keep them in public hands.
Kapoor has said that’s “the only way to provide the revenue needed to prevent drastic and unacceptable cuts to pension benefits and city services.”