Rebellious suburban Philly residents take a novel legal approach to thwart a sewer system sale

An uprising by a Montgomery County town’s residents who are unhappy about the privatization of their town’s sewer system moved into uncharted territory this month with the creation of a panel to rewrite the town’s governing charter to block the sale of the town’s wastewater utility.

The Towamencin Township Government Study Commission, which was created after 61% of voters approved it in November, wants to draft a home rule charter to make it illegal to transfer the town’s sewer system to a private buyer. The hope is to get the proposal to voters in May. If approved, it would create an immediate impediment to the sale of public utility assets in the township of 18,000 people bordering Lansdale.

The potential change to Towamencin’s local government constitution is perhaps the most dramatic step that opponents in the Philadelphia suburbs have taken to impede the sale of publicly owned utilities, which have ramped up since the passage of a 2016 state law, known as Act 12. The law was designed to encourage the consolidation of public water and wastewater utilities under private ownership. It has sparked bidding wars for municipal utilities, and also pushback from customers whose rates have increased dramatically, partly to compensate buyers for the high acquisition prices.

» READ MORE: A Florida company’s $115 million sewer bid stuns a suburban Philly town

It’s unclear if the novel legal strategy can derail the 4-1 decision by the Towamencin Board of Supervisors in May to sell the town’s sewer system to NextEra Water, a giant Florida energy and utility company that is expanding into Pennsylvania. But the new charter, if approved, could at least tie up the transaction in court for years and if successful, could blaze a path for other towns that want to stymie privatization.

“If the charter change is approved and they move ahead to complete the sale, they’re definitely going to get sued,” said Kofi Osei, who was elected to the study commission and named its chairman. But if the township tries to cancel the agreement to sell the assets, NextEra Water also could sue the township for breach of contract.

“It’s obviously untested, but we think it’s got a good chance of withstanding a challenge,” said Lauren Gallagher, an attorney advising the study commission. Gallagher is a partner in Rudolph Clarke LLC, a suburban Philadelphia law firm that represents towns and municipal authorities.

» READ MORE: A Pa. law sets off a feeding frenzy for public water systems.

“A home rule charter is a big hammer for a single issue,” said Gerald E. Cross, a senior research fellow for the Pennsylvania Economy League Central Division in Harrisburg, who has advised several municipalities and counties that have adopted home rule charters. “But if it’s a big issue, the voters are the ones who decide to wield that hammer.”

The organizers of the Towamencin effort say they launched the charter-change campaign after the town’s elected officials defied protests and voted to sell the system to NextEra Water, whose stunning $115.3 million bid was 25% more than the next highest bid. NextEra owns no other Pennsylvania utilities, and appeared to be overpaying for the system to establish a beachhead in the state.

Towamencin officials said the decision to sell the sewer system was a no-brainer: The infusion of cash from NextEra would allow the town to retire its debt and fund projects for years to come, and to get out of managing a utility best left to private industry. Supervisor Richard Marino called the sale “a generational opportunity to reboot and reset our finances for the foreseeable future.”

But opponents saw the sale as a mechanism for town officials to sign themselves a blank check on the backs of wastewater customers, a tax hike disguised as a sewer rate increase to the benefit of private investors.

“This seems like a kind of thing that home rule is meant for,” said Osei. If successful, he hopes Towamencin’s home-rule campaign will become a model for other towns opposed to utility privatization, though he suggests they enact the measure preemptively rather than wait for elected officials to quietly tee up a utility sale.

Towamencin activists said they were inspired by a 2020 effort in Norristown, where the municipal council voted to sell its sewer system for $82 million to Aqua Pennsylvania of Bryn Mawr, the largest private water operator in the Philadelphia suburbs. A citizen opposition group gathered more than 2,000 signatures that would have forced a repeal referendum on the ballot. Aqua walked away rather than face a likely electoral defeat.

Norristown already had a home rule charter in place that allowed for referendum petitions. Residents in townships such as Towamencin, which operate under state governing rules, don’t have the same power to repeal measures.

The Norristown opposition group, Neighbors Opposing Privatization Efforts, or NOPE, helped organize a public awareness campaign in Conshohocken against a proposed sewer sale in 2021, inducing the borough council to abruptly halt sale talks. NOPE also advised Towamencin residents.

» READ MORE: In Philly suburbs, sewer systems are for sale, and citizens push back, fearing rate hikes

The lesson from Montgomery County is that one of the most potent tools to thwart a sale is to organize political opposition before a governing body makes a formal decision to privatize. That was evident this year in Bucks County, where the Bucks County Water and Sewer Authority announced in July it had agreed to negotiate exclusively with Aqua to sell its sprawling system for $1.1 billion. The Bucks County Commission nixed the deal just two months later after local elected officials and the public voiced strong objections.

But in several towns, residents only took notice of the sewer system sales after the transactions were approved by the Pennsylvania Public Utility Commission (PUC), which reviews whether a deal serves the public interest and determines how much of the sale price the buyer can recover in rates. Thus far the PUC has not rejected any Act 12 acquisitions.

The PUC this year approved a statewide rate increase for Aqua Pennsylvania that saw customer bills go up by as much as 98% in five towns whose sewer systems Aqua acquired in recent years. In New Garden Township, Chester County, the first municipal utility acquired under Act 12, bills went up 90% this year, and several outraged residents have filed formal complaints with the PUC.

Leaders of a New Garden citizens opposition group called Keep Water Affordable, which formed only after the sale was completed, acknowledge there is little that can be done now to walk back the sale.

“We’re sort of at a turning point here about what we do next,” said Bill Ferguson, a leader of the New Garden opposition group. Its leaders are focusing more of their energy on trying to rally public support to block Aqua’s proposed $410 million takeover of the Chester Water Authority, which would impact New Garden and 32 other towns in Chester and Delaware Counties. That sale is being contested before the Pennsylvania Supreme Court.

In another Chester County community, Willistown Township, opponents of the town’s $17.5 million sale to Aqua are banking on a Commonwealth Court appeal filed in August by the Pennsylvania Office of Consumer Advocate, which challenged the PUC’s approval of the sale. The consumer advocate says the sale will fail to deliver “affirmative public benefits” and would instead harm all Aqua customers with higher rates.

Sale opponents are pressuring the Willistown supervisors to terminate the deal under a provision in the Aqua agreement, which allows for either party to cancel the contract if it is not consummated in early 2023. Molly Perrin, who was elected to the board of supervisors in 2021 after the sale was signed, said she would vote to terminate the agreement. The other two supervisors, who voted for the sale, have not indicated a change of heart. William R. Shoemaker, the board chairman, declined through a spokesperson to comment.

In Towamencin, the home rule charter campaign has strained relationships in the community.

Opponents of the Towamencin charter campaign — they don’t really call themselves supporters of the sewer sale — questioned the community commitment of their neighbors who have organized the charter campaign. They have focused their attention on Osei, whose parents are Ghanaian immigrants. He was born in Kansas and moved to Towamencin about three decades ago as an infant. Osei is also a member of the Democratic Socialists of America, a leftist political organization, as is David McMahon, who founded NOPE in Norristown.

“That scares me,” said Mary Becker, vice chairman of the Montgomery County Republican Committee, who led the unsuccessful effort to defeat the charter vote in November under the banner of TRUST, or Township Residents United Serving Towamencin. “I volunteer with a lot of people who came from socialist countries, and they’re terrified that our country is leaning towards socialism.”

Osei dismissed Becker’s comments. “The NOPE project is very much nonpartisan,” he said. Osei said he was the only Democratic Socialist on the slate of seven government study commission candidates, which he said included two registered Republicans. “Anything the commission does would need to be taken to voters,” he said.

The proposed Towamencin charter change would be modeled on a 2018 measure approved by voters in Baltimore banning the privatization of its water and wastewater systems. Osei said the charter-change committee intended to draft a home rule charter that changed as little as possible in the township’s existing governing, except for the prohibition on a transfer of utility assets to private owners, which Towamencin still needs to do to finalize the sale.

“This is a big process, and we’re trying to do it in three months,” he said. “We don’t want to make any big changes that might not be what we want. I think we might lose some votes if the changes are too big.”