Delaware County sues to block $276 million sale of public sewer system by outgoing Republicans

Delaware County on Thursday sued to block the $276.5 million sale of the county’s sprawling public sewer system to Aqua Pennsylvania, the company’s largest privatization of a public water or wastewater system in Pennsylvania.

The county council, which Democrats took over following November’s election after more than a century of Republican control, said last year’s sale agreement between the Delaware County Regional Water Quality Control Authority (DELCORA) and Aqua was a hasty no-bid deal to a politically connected company. The council said the sale was designed to prevent an important patronage stronghold from falling into Democratic hands when political control of the county changed.

“It was nothing more than a giveaway to a political contributor and the hardworking taxpayers of Delaware County deserve better," Brian Zidek, the council chair, said in a statement. "With the action we took today, we are advancing our goal of transparency and putting people over politics.”

The sale, which requires approval of the Pennsylvania Public Utility Commission, would transfer 165,000 customers in 42 towns in Delaware and Chester Counties to Aqua, dramatically expanding its current base of 29,000 wastewater customers. Aqua Pennsylvania, which is based in Bryn Mawr, is primarily a water utility and serves 450,000 customers.

Aqua Pennsylvania president Marc Lucca on Thursday defended the company’s actions. “Any insinuation that the company participated in a transaction that was a political payback is reprehensible and inaccurate,” Lucca said in a statement.

“This is a time that we should be focusing county resources on bringing employees back from furlough and responding to the COVID-19 crisis," he said, "not on political agendas or expensive lawsuits.”

The sale was approved last year by the DELCORA board, which is ostensibly independent of the county council, though its members are Republican loyalists. Rather than attempting to block the DELCORA decision directly, the lawsuit challenges the creation of an “illegal” trust that was set up to hold the proceeds from the sale, which would then be used to suppress sewer rate increases for almost a decade.

After losing the election, the outgoing county council allowed DELCORA to create the trust agreement with the Univest Bank and Trust Co. as trustee to receive the proceeds from the sale and spend them over eight years to reduce the impact of expected rate increases. The recipient of the trust funds would be Aqua Pennsylvania.

The lawsuit, filed in Delaware County Common Pleas Court, alleges that DELCORA does not have the legal authority under the Municipal Authorities Act to allow the wastewater authority to create a separate government entity "to distribute public assets to a private for-profit company, like Aqua.”

The lawsuit called the arrangement “a political patronage deal to benefit the outgoing members of the county council and their political supporters, to the detriment of the public at large.”

DELCORA, in a statement, said the lawsuit has no merit. “Further and most importantly, the complaint would hurt ratepayers, as the Rate Stabilization Fund was established in an open and transparent process to stabilize rates for their benefit,” the authority said in a statement.

DELCORA said it was prompted to sell its system to Aqua, which is a subsidiary of Essential Utilities, after the Philadelphia Water Department notified the authority it planned to dramatically increase the amount it charges DELCORA for treating some of its sewage at city treatment plants.

DELCORA said its customers would pay less, at least in the next decade, under Aqua’s private ownership, rather than paying the higher costs of staying on Philadelphia’s system or paying almost $1.2 billion to meet federal clean-water regulations.

After paying off DELCORA’s debt, about $210 million of the sale proceeds would go into the rate-stabilization trust fund to be used to reduce expected sewer-rate increases to about 3% per year through 2029, rather than an expected 8% increase.

Aqua’s negotiated price with DELCORA is about $1,600 per customer, less than half the price it is paying per customer to buy several smaller wastewater systems, including those in Cheltenham, Limerick, East Norriton, and East Bradford Townships. Critics say DELCORA might have gotten a higher price if it had sought competitive bids rather than offering to negotiate exclusively with Aqua.

American Water Works, an Aqua rival, issued a public letter last August questioning the sale arrangement and asking to be considered as a potential buyer. American’s letter said its evaluation of DELCORA valued the property at “potentially more than $400 million."

This story was updated to include a statement from DELCORA.