September 13, 2024

                                                                                                CC:  R. Siger, Secretary, DCED

 

Chester City Bankruptcy

(An Open Letter To The Governor)

 

Governor Shapiro,

 

I am a resident of Chester County and a customer of Chester Water Authority (CWA).  I am writing to express my total disgust about how the State has abdicated responsibility for the Chester City financial mess.  It has been six governors and almost 30 years since the State stepped in and found the city in a condition of “almost complete financial mismanagement”.  It appears that the State has just kept “kicking the can down the road”.  So now the situation deteriorated to the point that a rare municipal bankruptcy was filed.  Why was this allowed to get so bad? 

 

Covid clearly made the situation worse.  But, the federal government fire hosed money over everybody to defuse the economic impact.  This should have been the ideal opportunity to provide Chester City a fresh start.  But, that apparently did not happen.  Why? 

 

The real solution to the Chester City mess is three fold:

 

1. A competent and honest city government.

2. Economic development.

3. A fresh start:  Bankruptcy?  State funding?   Some combination of the two?

 

Monetizing CWA was not an issue until relatively recently.  It appears that the ownership issue came from Aqua – whose motive is not focused on Chester City.  Subsequently, monetizing CWA has become the State’s main focus.  However, does Chester City even have ownership rights to CWA?  An extensive legal process has been underway to answer that question.  In fact, the Pennsylvania Supreme Court agreed to resolve it and was ready to hear oral arguments.  But, your Receiver filed for federal bankruptcy, stopping State court action.  Could this have been because it appeared the Supreme Court might rule against Chester City?  The optics are not good. 

 

Does that mean a federal judge now determines the ownership issue?  That makes no sense.  State law still determines ownership.  One certain effect is extending the case for several more years.  The stakes are so high that no matter what the federal judge rules, it will be appealed up to the US Supreme Court.  The Chester City financial mess will continue the whole time. 

 

The plan to monetize CWA is the age old strategy of getting someone else to pay for your problems.  Sometimes it is called “beggar thy neighbor”.  In this case you want the CWA ratepayers of Chester and Delaware Counties to pay for all the mismanagement by both Chester City and the State.  The only source of CWA money is their ratepayers, 80% of whom live outside of Chester City. 

 

Your Receiver’s “Plan of Adjustment” has a particularly dubious feature.  He proposes to keep CWA publicly owned, but in a public-private deal that would funnel enough money to Chester City to resolve all the city’s financial problems.  That raises multiple red flag issues:

 

1) - In public-private deals the private party always seems to wind up with no skin in the game, but handsome profits.  Again, all paid for by ratepayers.

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2) - If the courts decide that Chester City really does own CWA, why would a third party be needed?  The city could raise rates and use the funds how ever it wanted.  The optics would be awful, but at least the “private party” is cut out.

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3) - For the ratepayers of Chester and Delaware Counties it raises the issue of taxation without representation.  Although not technically a tax, it amounts to backdoor taxation because their money would go directly to fund city government. It violates the principle that a municipal utility should be self sufficient.  And, it sets a terrible precedent for other money hungry municipalities.

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4) - It appears that the Public Utility Commission would not have jurisdiction to protect ratepayers.  That leaves ratepayers with unlimited liability for Chester City failures – past, present AND future.

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5) - Another odious feature of the bankruptcy process is that the selection of the “private” partner will be hidden from the public.  Nobody will know what kind of deals are being considered or who is connected to them.  Could someone politically connected get a nice payoff?

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If the ownership outcome is that Chester City does not have exclusive rights to CWA, what is your Plan B? 

 

In conclusion, we have a city that is bankrupt because of long term mismanagement by both the City and State.  After 30 years the State owns the problem as much as Chester City.  If the State is not willing to accept the normal “hair cuts” bankruptcy imposes, then the State should own up to the funding required to bail out the city. 

 

In short, when is the State of Pennsylvania going to do what is needed for the City of Chester?  The State’s performance to date has been shameful.  It is time to man up and face the problem. 

 

Thank you for your attention,

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Bill Ferguson

Co-Founder of Keep Water Affordable

Email: keepwateraffordable@gmail.com  

 

 

P.S.  Copies of this letter will be emailed to a number of Representatives, Senators and media contacts.  A copy will also be posted on our website at keepwateraffordable.org