8 years of payments to bankrupt Chester’s ‘rain tax’ board members may have been illegal, receiver says

Hundreds of thousands of dollars in payments to members of the ”rain tax” board in the city of Chester may have been made illegally during the last eight years, and they may have to pay back the money, the city’s bankruptcy receiver said Tuesday.

The receiver’s office, which has petitioned U.S. Bankruptcy Court to order the Stormwater Authority of Chester to turn over financial documents, also said the agency may have violated state law by accepting a $40,000 loan from its executive director, Horace Strand, and his church to meet payroll in the fall.

Said Strand, the receiver’s demands constitute “a political hit job” aimed at an authority that was formed during the previous mayoral administration and whose stated mission is to manage the discharges of rainwater and melted snow and ice and control flooding.

At issue, the receiver says, is a state requirement that salaries for board members must be approved by City Council. Strand estimates that annual pay for board members — there are six currently — ranges from $12,000 to $24,000. He said he was not sure when the council approved the amounts, but “would assume” it was around the time the board was created in 2016.

However, during a presentation at the semi-monthly meeting of the bankruptcy committee, which includes state and county officials, Vijay Kapoor, the receiver’s chief of staff, said the city solicitor found no evidence that the council ever approved the salaries.

If it turns out that the authority didn’t have the power to set salaries, those who received them may have to pay them back.

Said Strand, “This is just a blatant attack. There’s a lot of crucial issues they should be addressing in the city, rather than attacking the stormwater authority.”

More than 2,200 similar stormwater authorities exist in the United States and are part of a growing movement, as communities contend with heavy rain, ever-increasing volumes of paved surfaces, and tougher federal standards. Stormwater fees are levied to pay for piping and other infrastructure projects to make water cleaner and reduce the runoff flowing into waterways.

The fees the Chester board imposes, about $200 a year for a typical homeowner, are based on an estimate of a property’s hard surfaces or “impervious cover.” Since only about 30 of the nation’s 35,000 municipalities have filed for bankruptcy, Chester is likely the first and only bankrupt city with a stormwater authority.

In Chester, where 28% of the households live in poverty and which has the second-highest wage tax in the state, residents derisively label the fee, among the highest in the country, “the rain tax,” and have been resistant. Through April 25, 1,711 liens have been filed against property owners for non-payment.

Strand said the fee is not a tax, but is dedicated for a specific service. He said that a rate jump in October was a return to the original fee, which was cut in half after a public outcry.

“We’ve been doing a phenomenal job in Chester,” said Strand, saying the authority has been effective in taming floods.

The authority has undertaken a grant-funded $10 million project to build a flood-control retention pond in Memorial Park in the flood-prone area of the West End.

But Mayor Stefan Roots, who assumed office in January, has dubbed it “Lake Inferior” and holds that less expensive alternatives are available.

For the last two months, the receiver’s office, with the support of the mayor, and the stormwater authority have been enmeshed in a mud-wrestling match over the authority’s financial documents.

Kapoor said the receiver’s office is seeking basic information such as how many members actually are on the board.

The authority’s articles of incorporation list five members; however, Strand has said that the board may grow to nine. He said this month that two members of the council and a city official who had stepped down from the board after the city solicitor ruled that they couldn’t draw two salaries could rejoin if a court rules in their favor.

Strand suggested that he may have been more cooperative if the receiver’s office and the mayor hadn’t been so confrontational.

The receiver’s office says the documents are critical to knowing exactly how the board is spending its money and whether already tax-burdened fee-payers are getting their moneys’ worth.

In addition, Kapoor has said, the authority’s assets belong to the city and that the receiver has a mandate to see that they retain their value.