On Wednesday, the state-appointed receiver for the city of Chester issued a request for qualifications (RFQ) for the sale, lease or other form of monetization of the drinking water, sewer and stormwater systems serving the city of Chester. This is the latest attempt by a state-appointed receiver to put a Band-Aid on the city’s financial crisis and mask the Commonwealth’s decades of failed oversight by cashing out the public water assets, which will drive up water rates across the region. 

The RFQ indicates that while the assets must remain nominally under public ownership, the receiver welcomes proposals from private corporations for a long-term lease, management or concession of the systems. The request also indicates a desire to maintain affordable rates for all ratepayers, which directly conflicts with the overall goal of the request to take cash out of the systems. 

“Governor Josh Shapiro must stop this dangerous water grab immediately,” said Ginny Marcille-Kerslake at Food & Water Watch. “Chester residents deserve real financial support from the State to make up for decades of harm. It is ludicrous to think a corporation will take over the water systems and donate money to the city. As a matter of business, the corporations will recover all payments with large profits through rate hikes on Chester and neighboring communities. This will be devastating for many, especially low-income households already struggling with the high prices of the basics.”  

Long-term lease and concession contracts have been broadly criticized as budget gimmickry. These one-shot ploys mask underlying problems, seek to hide liabilities off budget, delay hard decisions necessary for fiscal sustainability, and increase the long-term costs borne by households and local businesses. 

The biggest asset at stake is the Chester Water Authority, but the move to monetize it appears to conflict with a pending state Supreme Court case. The state Supreme Court is poised to address issues that bare directly on any claimed ownership interest by the City. Chester Water Authority claims the assets are owned by the public across its service area and should be held in public trust for the public benefit.

“This RFQ/RFB process is presumptuously arrogant and reckless,” stated Noël Brandon, board chair of the Chester Water Authority. “No court has ruled that the City can sell or monetize the assets of Chester Water Authority. This matter is now before the PA Supreme Court, and this RFQ/RFB is being performed purposely and prematurely in an attempt to subvert that court and advance the monetization process of our assets before we have a ruling.”

“Water, sewer and stormwater management are essential needs for everyone,” said Bill Ferguson, co-founder of Keep Water Affordable. “Non-profit municipal systems and authorities are an ideal way to provide these services. Non-profits only charge just enough to cover the cost of operation. This proposal is an attempt to convert non-profit operations into a money machine to fund Chester City’s debts and operations. It is especially egregious in the case of Chester Water Authority (CWA), as over 80% of CWA customers live outside of Chester City. This amounts to the state-appointed receiver trying to impose a hefty backdoor tax on customers who have no connection to the city. The receiver for Chester is attempting to ‘beggar thy neighbors’ to resolve a long history of financial problems in the city. Gov. Shapiro should stop this.” 

The RFQ also requires all prospective proposers to sign very strong confidentiality agreements to keep the details of the process behind closed doors and out of the public spotlight. Backroom deal making erodes public trust in the process. 

Notably, concession and lease deals are not subject to oversight from the state Public Utility Commission. The rates and services are dictated by the contract language itself. Cities in fiscal distress bargain from a weak position and usually lack the capacity to negotiate a good deal and oversee the resulting contracts and maintain operational and service integrity. The long history of service quality and affordability that CWA has provided with excellence will undoubtedly be destroyed if any such deal were to become a reality.

There is one other private water concession deal in Pennsylvania. In 2014, Middletown, Pa., entered into a 50-year concession for its water and sewer system with a consortium of KKR and Suez. Five years into the deal, the borough lost a lawsuit that sought to stop surcharges imposed by the concessionaire to offset revenue shortfalls from household water conservation. At the time, the council president indicated that if the borough could exit the deal, it would. Even though Middletown is trapped by the terms of the contract, the concessionaires were not: Suez has since merged into Veolia, and KKR sold its stake to Argo Infrastructure Partners. 
For more about the harm of using water privatization to fill budget holes, please see Food & Water Watch’s report called Borrowing Trouble: Water Privatization Is a False Solution for Municipal Budget Shortfalls.