Pa. Supreme Court hears arguments on a pivotal question in Chester’s bankruptcy: Who owns the water?
The state Supreme Court's decision could have profound impacts on the future of the city.
In what may turn out to be a $400 million question in the City of Chester’s historic bankruptcy, the state Supreme Court heard arguments Wednesday over who owns the Chester Water Authority and who has the right to sell it.
State law clearly gives the city control over the assets, said Chester attorney Matthew White.
Noting that only a minority of its customers are in Chester, the water authority in effect is the province of “multiple jurisdictions,” countered authority attorney Kevin Kent.
The authority wants the court to overturn a 2021 Commonwealth Court ruling that Chester was the sole owner of the authority and thus could entertain suitors.
That decision came after Aqua Pennsylvania offered to buy the authority for $410 million, representing about six times the city’s annual budget.
After listening to the arguments from attorneys, including those representing Delaware and Chester Counties and Aqua, the state high court said it would take the case under advisement.
What’s at stake in the Supreme Court’s decision?
For Chester, which has been in “distressed status” for 30 years and in bankruptcy since November 2022, a sale of the water assets would mean avoiding drastic cuts in services and retirement benefits.
State-appointed receiver Michael Doweary, who had opposed the Aqua sale, has proposed creating a regional water organization by bundling the water authority and two other water-treatment entities. He has insisted that the assets remain “in public hands.”
White argued Wednesday that a 2012 reconstitution of the water authority board was the project of “legislative fiat.” In a stealth bill passed without debate by the GOP majority in the state legislature, the authority board was expanded to nine members, with only three from Chester.
Kent countered that the legislature’s action made sense since it gave representation to customers in 33 towns in Chester and Delaware Counties. He concluded by asking the justices to be “cognizant” of the customers’ substantial interests.
Frank Catania, another water authority attorney, said in an interview earlier in the day that if the court rules in Chester’s favor, “our customers will have to bail out the city.”
Chester incorporated the water authority in 1939. Its treasury receives no revenue from its operations.
What happens next in the Chester bankruptcy case?
The receiver’s office says it continues to make progress in restoring fiscal order in Chester, one of only about 30 of the nation’s 35,000 municipalities to file for bankruptcy.
But receiver chief of staff Vijay Kapoor, who will succeed Doweary when he steps down on July 1, has acknowledged that the fate of the water assets isn’t the elephant in the room; it’s the elephant, and the room.
If the city isn’t able to tap the water system for money, “there’s going to be a lot of pressure to make some very severe cuts” to pensions, Kapoor said.
It is not known when the court might hand down a decision.