Chester receiver proposes selling water authorities to help rescue the city from bankruptcy

For a city that has been drowning in debt, Chester’s state-appointed bankruptcy receiver on Monday proposed what might be an ultimate economic water rescue.

In a motion filed Monday afternoon, receiver Michael Doweary asked a U.S. Bankruptcy Court judge to approve a plan that would allow his office to pursue the sale of the water systems in the city, preferably to a public entity that would operate a new regional agency.

The proposal — likely to encounter a tide of resistance from officials who operate the systems in question — is aimed at expediting the city’s emergence from its nearly two-year-old bankruptcy.

“The City’s goal is to secure guaranteed annual payments,” the receiver’s office said in a news release, which did not disclose dollar amounts or possible upfront fees for the proposed sale.

» READ MORE: Chester’s stunning economic decline: How it went from a factory boom town to bankruptcy

But after the filing, Vijay Kapoor, the receiver’s chief of staff said, “We’re potentially talking about a lot of money.”

Three years ago, Aqua Pennsylvania agreed to pay the city $410 million for the Chester Water Authority, one of the entities that would be involved in any sale of Chester’s water systems.

At the time, Doweary, the state receiver who has opposed any private takeover of the city’s water resources — lest it lead to eventual spikes in rates — declined to permit the city to sign the agreement, and has insisted that they remain in public hands.

He said his plan would “minimize the impact on ratepayers and provide a regional solution to stormwater management.”

Delaware County’s only city, Chester has been in the state’s “distressed” status going on 30 years, in receivership since 2020, and in bankruptcy since November 2022 — largely the result of a shrunken tax base and several years of missed pension payments.

It is among only about 30 municipalities nationwide that have declared bankruptcy since Congress offered the option in the 1930s.

Earlier this year, the state auditor general’s office described the city’s pension system as being in “severe distress.” The receiver’s office has been in ongoing negotiations with creditors and pension interests.

The city’s $70.6 million 2024 budget expenditures represents about $2 million more than projected revenues.

With decades of lost jobs and population, Chester’s tax base is eviscerated, with real estate and earned income taxes accounting for only about a third of the budget. The city counts on Harrah’s Philadelphia Casino and Racetrack and an incinerator plant for about $13 million annually.

Chester’s tax base “can’t support basic city services,” the receiver’s office said in the news release.

Of the proposed sale of the city’s water systems, Kapoor said Monday that “we’ve got to move on this.”

“We have grants that are going away. We’ve got potentially a fiscal cliff in 2026.”

The receiver’s office said that one aim of the proposal would be to control water costs for residents and businesses.

Chester property owners currently pay bills to three separate entities — the Chester Water Authority, which supplies water to 34 municipalities in Delaware and Chester Counties; the Delaware County Regional Water Quality Control Authority (DELCORA), a wastewater treatment concern that serves multiple towns in the two counties; and the Stormwater Authority of Chester, which manages the stormwater in the city and levies the controversial so-called “rain tax.”

» READ MORE: A ‘rain tax’ spurs a storm of controversy in the Philly region, and a court case with broad implications

On average, the three bills cost homeowners about $1,000 annually. By comparison, the average water cost in Philadelphia is about $895 in a city where median household incomes are about 40% higher than those in Chester.

Horace Strand, executive manager of the stormwater authority, said that his attorney was reviewing the receiver’s filing.

The receiver’s office would seek “requests for proposals” for applicants to buy, manage, and operate the water and stormwater authorities and the city’s stake in DELCORA “with the requirement that it be publicly owned,” the release stated.

“If done properly,” Doweary said in the release, the plan “could not only help Chester address its financial situation,” but “provide a regional solution to stormwater management.”

Mayor Stefan Roots, who was inaugurated in January, said he supported the plan, calling it “our best opportunity to let Chester be Chester and to ensure we have the revenue needed to meet our obligations, and to improve and sustain the services that our residents need and deserve.”

Said Kapoor: ”We’re taking a very, very big step.

”This isn’t going to solve all of Chester’s problems. This is a step. We think it’s an important step, and step we have to take.”