Welcome back to Muni Matters, the show where we, we dive into that fascinating world of local government. I'm Elliot Rhodes. And I'm Samantha Carter. Today, Samantha, we're, we're going to Chester, Pennsylvania. And Chester's been kind of struggling with some serious financial problems for decades. Yeah, for a long time. Chester's been under state financial oversight for almost 30 years now, and they've been facing these chronic deficits and just, just a mountain of pension obligations. Actually, as of this year, the City owes about $40 million in missed payments to its pension plans. Wow. So in November 2022, they finally filed for Chapter 9 bankruptcy. And right at the center of all of this is the city's water system. For those who might not know, Chapter 9 bankruptcy is specifically designed for municipalities to kind of restructure their debts and their finances under court supervision. And this often includes figuring out how to deal with valuable assets. And in Jester's case, that's their water. Yeah, exactly. We're talking about the Chester Water Authority, or cwa. And this isn't just like some small town water system. It supplies over 200,000 people across 37 municipalities in Delaware and Chester counties. And it has a pretty interesting history, don't you think? Absolutely. Established back in 1939 when the city bought a private water company, the CWA has actually won awards for its water quality, including best tasting water two years in a row. Yeah, not too bad for a city facing such huge financial challenges. Yeah, it's really interesting, like how a system can produce such high quality water but still be caught up in all this financial turmoil. And the plot kind of thickens when you think about the fact that back in 2017, a private water company, Aqua Pennsylvania, offered $320 million to buy the CWA. Wow. That's a pretty big offer. Makes you wonder why the city didn't just jump at that chance to solve some of their financial problems. Right. Well, the CWA's governance structure plays big part in all this. See, up until 2012, their five member board was appointed solely by Chester's city council. But then, just 18 days before a state budget deadline, this seemingly random amendment to a utilities bill totally changed everything. Wait, so you're telling me a last minute amendment suddenly changed how the CWA was governed? Exactly. Yeah, they expanded the board to nine members. So now Delaware and Chester counties each got to a point, three members alongside Chester's three. So this shifted control away from the city itself. So what was the motivation behind that amendment? It all sounds a little fishy. It really? Does the receiver, Michael Dowery. He definitely thinks so. This change happened right when the city's political leadership was shifting from Republican to Democrat. And it makes you wonder if this was a strategic move just to maintain power over the cwa, even if it meant possibly harming the city's finances down the road. You know, because if they can't sell it, they can't use the money to pay off those debts. So what happened next? Did the CWA fight back against this change? They did, yeah. They argued that this amendment actually transferred ownership to the authority, meaning the city couldn't even sell it if they wanted to. It went to Commonwealth court, and in 2021, they ruled in favor of Chester. They said the city does have the right to sell it. Of course, it doesn't end there, does it? Nope. The CWA appealed that decision to the Pennsylvania Supreme Court. But then, just days before the Supreme Court was supposed to hear the case, the receiver did something really dramatic. Okay, I'm on the edge of my seat. What did he do? He filed for Chapter 9 bankruptcy for the city. Wow. That changes everything. What was the strategy behind that? Well, it was a pretty bold move. It put the Supreme Court case on hold and gave him more time to figure out a solution for this whole financial mess, including what to do with the cwa. But here's the thing. He doesn't actually want to privatize the water authority. Why not? It seems like the easiest way to get a huge influx of cash, right? Well, yeah, but he's worried about how it'll affect the residents of Chester because, you know, privatization often leads to rate hikes, and he's really trying to avoid that, you know, to avoid putting an even bigger burden on them. So if he doesn't want to sell to a private company, what's his plan? So In August of 2024, he filed a plan of adjustment. His idea is to monetize the water, the wastewater, and the stormwater assets, but with one big stipulation. They have to remain publicly owned. That sounds a bit tricky. How does he plan to pull that off? Well, he's looking at things like long term leases or management agreements with other public entities. He really believes that this will bring in some much needed revenue for Chester, or while also ensuring residents still have access to affordable water. I bet this plan isn't going over well with everyone. You're right about that. The CWA is totally against it. They're calling it a backdoor privatization scheme, and they think that it will eventually lead to those rate increases and service decline that the receiver is trying to avoid. They're pointing to other cities where this has happened. And on the other side, what about the retirees and the unions? Are they on board with the receiver's plan? Well, they're skeptical, too, but for a different reason. They believe that excluding private bidders is going to, like, significantly reduce the amount of money that the city gets. And their argument is that maximizing that sale price is really crucial to make sure the city can meet its pension obligations. So it sounds like the receiver is walking a tightrope here, trying to please all these competing interests, all while keeping Chester afloat. It's kind of fascinating that Aqua Pennsylvania, that same company that tried to buy the CWA back in 2017, have emerged as, like, well, a kind of unlikely ally for the cwa. Right. It's a weird twist. They actually filed a statement with the bankruptcy court opposing the receiver's plan to monetize the CWA while keeping it public. That is unexpected. Why would they do that? Didn't they want to buy it in the first place? Yeah, they did. And they actually even increased their offer to $410 million, but the receiver blocked it. I guess they're concerned about the receiver's approach here. They're saying that he's trying to get around the normal regulatory process and use bankruptcy court to, well, force a sale. So they're not necessarily against acquiring the cwa, they just want it to happen through the normal channels. Exactly. They don't want to see this precedent set where the bankruptcy process can be used to basically sidestep the Pennsylvania Public Utility Commission. I think it's a valid concern. This whole situation really raises questions about the balance of power between, you know, local governments and state agencies and the courts. It really does. And just to add another layer of complexity to this whole thing, remember that appeal to the Pennsylvania supreme court? Well, in November 2024, the bankruptcy judge allowed it to proceed. That's right. So now this fundamental question of who actually owns the Chester Water Authority is back on the table again. It's a real legal limbo situation, and the stakes are high. Yeah. If the Supreme Court sides with the cwa, the receiver's plan to monetize the system while keeping it public is. Well, it's basically dead in the water. Yeah. And even if the city wins, finding a buyer who's willing to meet those specific criteria and offer enough money to satisfy the creditors and the retire, I mean, it's a huge challenge. This case really could have a ripple effect far beyond Chester. Couldn't it? Oh, absolutely. It could set a precedent for other municipalities in Pennsylvania and really across the country that are struggling with these same kinds of issues. This case could actually determine whether cities like Chester, who have water systems serving people outside of their city limits, you know, have the power to actually sell those systems. And it could also impact how receivers, you know, the ones appointed to oversee financially distressed cities, how they manage these assets. It's a lot to unpack. And beyond the legal stuff and all the financial maneuvering, let's not forget about the people and all of this. The residents of Chester have already been through a lot. You're right. They have decades of financial oversight, the threat of losing control of their water system. And let's not forget about that incident in 2022 where a city councilman accidentally sent $400,000 to a scammer in a phishing scheme. Yeah, it's almost hard to believe, and it shows the level of dysfunction that Chester have been dealing with. And sadly, this isn't an isolated thing. Yeah, you see this all over the country. Municipalities are grappling with similar problems. They're dealing with aging infrastructure and shrinking tax bases and, you know, those ballooning pension obligations we talked about. Yeah, it's a perfect storm. And it's forcing these local governments to make these really tough choices. And, you know, as we see with the CWA privatization, though, it seems like an easy fix. It has a whole other set of risks and complications. Right. Supporters of privatization say it can lead to, you know, increased efficiency and better service. But critics point to cases where it actually results in higher costs and service quality goes down. And it's not just the CWA that's pushing back food and water. Watch, that national advocacy group that's, well, really fiercely opposed to water privatization. They're actively involved in this, too. Yeah, exactly. They've been really vocal about their concerns, and they highlight the potential negative consequences for residents if the system does end up in private hands. So while we wait for the court to decide, the people in Chester are stuck in this. This in between place. They just want clean, affordable water while also knowing their city needs financial stability badly. Yeah, that's exactly what it is. The city's struggling with this massive pension debt. The receiver thinks monetizing those water assets is their best bet. But how can you come up with a solution that generates revenue for the city, but also keeps system public and protects residents from those rate hikes? Yeah, it's a delicate balancing act. It really highlights how complicated it is to manage and fund these vital Public services like water. And you can't forget about that complicated relationship between municipalities and their authorities. This whole thing just shows that these decisions about water aren't just about money. You know, they have an impact on people, their livelihoods, and their access to this crucial resource. You mentioned that Act 12, that 2016 Pennsylvania law made it easier for private companies to acquire public systems. How has that law played into this? Oh, Act 12 was a big shift. It created this whole new framework for figuring out the fair market value of these public water systems. And critics say it's basically encouraged privatization across the state. Yeah, and I can imagine that that's a major concern for people who are worried about rate hikes and service quality going downhill. You know, private companies, they answer to shareholders, while public systems like the cwa, they're more focused on providing affordable water. Exactly. You know, people who support Act 12 say that it lets municipalities get a fair price for their systems, especially the ones that are struggling financially. But critics like the cwa, they believe it's made it a lot harder for those public systems to resist being taken over. And sadly, this isn't just a problem in Pennsylvania. This trend toward privatization is happening all over the country as cities and towns strug financially. Selling off their water systems might seem like a quick fix, but. Well, you have to remember there are these long term consequences to these decisions. It's important to really weigh the potential benefits against the risks before doing something that could affect people for generations. We talk about the receiver's plan to get money from the water system. But let's get back to Chester's pension crisis. I mean, that's a huge reason for all this, right? It is. It's been building for years, literally decades. The city didn't put enough money into their pension plans, and now they're pay the price. You know, they have this enormous unfunded liability. This year alone, they owe $40 million in missed payments. It sounds like a ticking time bomb. That's a pretty good way to put it. The receiver is under a ton of pressure to figure out something that will bring in a lot of cash. You know, he has to fix this pension problem before it basically cripples the city. But, I mean, you've got retirees who depend on those pensions to pay for their retirement. They work for the city. You know, they deserve to be taken care of. Absolutely. And their concerns are important. But on the other hand, you have current residents, a lot of them, already struggling financially, and they're worried about higher taxes or cuts to services because of whatever the solution is the receiver is. In a really tough spot. He's got to balance the needs of retirees with the needs of current residents, all while trying to navigate this legal mess and keep the city running. Yeah, there's pressure coming from everywhere. The retirees and the unions want those water assets sold to the highest bidder, whether it's public or private, because they want to get the most money and make sure those pension obligations are met. And then you've got the CWA and Food and Water Watch saying, keep the system public, even if it means less money, because they care more about affordable water and good service. Right. And in the middle of all this, the people in Chester just want to know what's going to happen to their water. They want to know that it's going to be clean and affordable and that they can count on it. It's a lot to ask of a city that's facing so many problems. To really understand how bad Chester's financial troubles are, you kind of have to look at the bigger picture, you know, the economic landscape. Chester's got a long and complicated history. It was a busy industrial center once. Yeah. Like a lot of cities in the country, it was hit hard when manufacturing jobs started disappearing. Exactly. And as those jobs went away, so did the city's tax base, and that led to this downward spiral. Less money for schools, for infrastructure, for public safety. And that just makes it even harder to get new businesses and people to move in. Yeah, it's a tough cycle to break out of. It doesn't help that Chester's also had to deal with, you know, years of political corruption and mismanagement that just made things worse. So you have this combination of, well, economic decline and these internal issues that have all led to Chester's current crisis. Yeah, that's right. They've tried different things to turn things around, like trying to get new development projects like that Harrah's casino and racetrack and Subaru Park. But those haven't been enough to fix the real financial problems. Nope, they haven't. And that's why the receiver is looking at these, well, kind of drastic measures, like trying to get money from the city's water assets. So as we finish up this part of our conversation, it's clear that this situation is really complicated. It's not just a city selling off its water. Right. It's about a city trying to survive. It's a reflection of the challenges that towns and cities are dealing with all across the country. And I think it really underscores that fundamental right to Clean, affordable water. This isn't a simple issue, and what's at stake is really important. Yeah, definitely. As the legal battle goes on and the receiver thinks about what to do, the people of Chester are watching, hoping for a solution that will secure their future future and protect this, well, this really important resource. It's amazing how something like water, you know, so essential, has become this battleground for money and politics. Yeah, it really says something about how much we value water versus how we take care of it. You know, we just turn on the tap and expect it to be there. But there's this whole complex and expensive system behind it all. Yeah, a system that needs constant work and money. And as we've seen in Chester, when that money isn't there, things can get pretty bad. Chester's in a really tough spot trying to find ways to get money, but also protect residents and keep their water system public. That's a hard thing to do. The receivers plan to find a, well, a public entity to manage the water system. That's a gamble, right? Yeah, it is. He's basically hoping that he can find someone who can make the system work well, but also keep rates down and make sure service doesn't go downhill. And all of this has to happen pretty fast. You mean because of that fiscal cliff Chester is going to hit in 2026 when that American Rescue Plan act money runs out? Yeah, that's right. That deadline is coming up quick, and it adds a lot of pressure to this already messy situation. It just shows how important it is to find a solution, and soon. So while we wait for the court to make a decision and see if any public entities step up, what are some of the bigger lessons here? What can other cities learn from what's happening in Chester? Well, I think the biggest thing is to be smart about money. You know, don't wait till you're almost bankrupt to deal with things like pension obligations. The fewer choices you have, the harder it gets to fix things. So be proactive. Don't just wait for things to blow up. Exactly. Another thing is to be transparent and communicate with everyone involved. You know, throughout this whole thing in Chester, there have been accusations about shady deals and people not talking to each other, and that just creates mistrust and makes it harder to find a solution, especially when you're talking about something like water. Trust is super important. So involve the community, be honest about the problems, and work together. Right. I know that's easier said than done, but it seems like a good goal. Definitely. And Chester's story really shows how we need to protect what's public. You know, water is something everyone needs. It's not just something to be bought and sold for profit. Couldn't agree more. Yeah, seems like making those public systems stronger, not getting rid of them, should be what we focus on. Yeah, I mean, investing in infrastructure, taking care of public employees, making sure those essential services stay affordable and accessible. That's all key. And yeah, I know some people say privatization can make things more efficient, more. Innovative, but that shouldn't mean people can't afford it or that the quality goes down. Right? Exactly. And that's a risk, especially in communities where people aren't as well off. Any talk about privatization has to be really careful, weigh the good and the bad, and always think about how it'll affect people in the long run. So as we wrap up our look at this whole Chester Water Authority situation, what do we want listeners to take away from all this? I think it's really important to remember that this isn't just some local thing. How cities manage their money, how they provide those essential services, the future of water, it's all connected. You know, these are questions every community needs to be thinking about, and there's no one answer that fits everywhere. And these decisions about water, they're going to have effects for a long time. We have to think beyond just now and consider how it's going to impact people down the line. It's about the long game, not just a quick fix. Absolutely. And you know, what's happening in Chester, it's a wake up call. We all have a part to play in protecting these public resources. You know, stay informed, get involved in your local government, ask questions, and make sure your elected officials are doing the right thing when it comes to important services like water. I agree. It's been a fascinating, maybe even a bit stressful look at the world of municipal water. We'll definitely keep following the story and keep you all updated. Thanks for joining us on MuniMatters. Until next time, stay hydrated and stay engaged.