Chester Receiver hovers in monetizing the water board as the “only realistic way out” of possible bankruptcy – WHY | Vette Leader

Kapoor emphasized that Chester cannot both pay pension costs and fund services for residents.

He said that for years Chester’s total expenditures exceeded revenue and the city was only able to function by not paying its statutory minimum annual payments to its pension plans, also known as municipal minimum commitments (MMOs).

The bill is overdue.

“The truth is this is not a situation that can be resolved with small incremental actions. We’ve been looking at where we can talk about some of the steps we’ve taken here. The only way to really fix Chester’s problems, not just put a band-aid on it — is to take some meaningful comprehensive action,” Kapoor said.

As WHYY News first reported on May 18, Doweary recently filed for and received approval from the state Department of Community and Economic Development to file for bankruptcy — should he choose to do so. Nothing is imminent just yet as teams consider options.

However, Kapoor added that many options have already been exhausted. For example, Chester City Hall has had its staff reduced drastically, departments have been merged and there are plans to cut salaries for elected officials.

Kapoor: Monetizing the water system is the only way out

The receiver’s solution is sure to cause controversy.

“The only realistic way for Chester to be able to put the amount of money it needs to pay an affordable pension into its pension funds is to monetize the Chester Water Board,” Kapoor said.

Based in the city of Chester, it is one of the largest public water supply systems in the region. The CWA serves more than 200,000 people in 37 communities in Delaware and Chester counties.

Aqua Pennsylvania was determined to buy the water board from the city that founded it in 1939. However, the CWA has retained its independence from the city, leading to ongoing litigation.

The Pennsylvania Supreme Court is currently hearing the case after agreeing to appeal a lower court decision. Oral negotiations are expected in autumn.

In the meantime, the team feels that selling the system would bring in the large cash inflow it desperately needs to pay for pensions, city capital, and other financial needs.

Kapoor discussed three possible routes. The first is not to monetize, which in his opinion would not solve any of the problems.

The second way is privatization. He acknowledged that while this would ensure pensions and financial needs are funded, it would increase water prices. Should the city lose the ongoing court case, Kapoor emphasized that the city could still end up in a no-monetization scenario.

“No monetization” is the worst-case scenario, this privatization path is what I call the high risk, high reward if you will,” Kapoor said.

Kapoor described a third way that he said could potentially solve all problems if done correctly. Categorized as keeping it in “public hands,” the concept would essentially require the CWA to pay for itself.

The scheme has two parts: a substantial amount of cash to fund the pension and other Chester needs, and smaller annual payments.

“So, this concept, this third option, if you will, would keep the water system public, minimize the cuts in pension and health care benefits for retirees, and eliminate the city’s reliance on incinerator fee payments. While water prices would rise, as they would if the system were privatized, they may not rise as high if the water system were privatized,” Doweary said.

The bankruptcy trustee’s team views this plan as a win-win for the city and even for the CWA.

“The system would remain in the hands of the CWA here … and it would basically be up to the CWA to decide how these payments would be funded,” Kapoor said.

Ultimately, this would require the CWA to agree on a fair price with the city. The CWA has previously offered the city $60 million, which may not be the number the financially crumbling city is looking for.

“If I were in CWA’s shoes, I would respond with … ‘You haven’t given me a number yet. So I don’t know if this is feasible or not.” And that’s fair, right. We have to develop that and come up with it,” said Kapoor.

Mayor Thaddeus Kirkland stepped in to acknowledge previous discussions with the CWA.

“The concept you’re just describing, we’ve been in talks before the bankruptcy trustee. The city has been in talks with the Chester Water Authority and is discussing this very concept. There was a number that came out from the water board, but it came with the number of years,” Kirkland said.

Regarding the negotiations, Doweary said any changes will be considered once the third option is exhausted.

“The worst case scenario, I think it sounds like if we can’t reach an agreement with the Chester Water Authority board then we have no choice but to go for privatisation. We can’t go to court with an all-or-nothing scenario and risk it all,” Doweary said.

Update on Chester’s controversial parking deal

Since 2018, Chester has been on a rather lucrative parking deal for the company, but the city doesn’t make any revenue from the parking meter revenue.

Doweary made public his concerns about the city’s parking contract with Delaware-based PFS VII LLC back in January. At the time, he called the contract “very one-sided in favor of the parking space manager”.

An investigation by WHYY News reported on May 4 that while the city of Chester does not benefit from the deal, public campaign funding records showed the mayor’s campaign likely benefited. Kirkland has received a total of $15,000 from individuals and entities associated with the contract for his congressional and mayoral campaigns since the signing of the agreement.

Kapoor’s presentation on Tuesday raised even more concerns “about how this deal appears to have come about.”

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