Chester Receiver Files Plan of Adjustment; Seeks RFP to Monetize City’s Water, Wastewater and Stormwater Assets and Keep Them Under Public Control
Chester, Pa., (Aug. 26, 2024) – The Receiver for the City of Chester filed a Plan of Adjustment in U.S. Bankruptcy Court that proposes a process to generate annual revenue for City services by monetizing Chester’s water, wastewater and stormwater assets, while keeping them in public hands.
The plan is a critical step because Chester must be able to provide a means for restructuring its debts while maintaining an appropriate level of necessary services to residents on an ongoing basis to exit bankruptcy. Chester suffers from unsustainable retiree pension and health care costs, as well as a tax base that cannot support basic city services. In order to avoid extreme cuts in retiree benefit levels and services, Chester must generate substantial revenue by monetizing its most valuable assets.
Under the Receiver’s plan, the City would issue a request for proposals to third parties to acquire, manage, or operate the City’s water, sewer and stormwater assets with the requirement that they remain publicly owned. Special consideration would be given to public authorities or other public entities interested in a merger or other combination. Applicants will be encouraged to provide proposals that:
Minimize the impact on future rates and ratepayers, particularly those within Chester
Retain public sector jobs
Provide a regional approach to stormwater management with the ability to potentially manage the stormwater requirements of other communities who voluntarily agree to participate
Include a proposed governance structure that is fair to ratepayers served by the entity
As part of the monetization process, the City’s goal is to secure guaranteed annual payments for the acquisition or use of its water, stormwater and sewer assets. These payments would allow the City to ensure it has the revenue needed to provide necessary services to residents.
“I am excited to propose an innovative approach that, if done properly, could not only help Chester address its financial situation, but also result in a publicly-owned regional entity that would preserve public sector jobs, minimize the impact on ratepayers and provide a regional solution to stormwater management,” said Chester Receiver Michael T. Doweary. “While more work needs to be done, this is the first step in how best to move forward for the residents of Chester."
Chester Mayor Stefan Roots said, “This plan is our best opportunity to let Chester be Chester and to ensure we have the revenue needed to meet our obligations and to improve and sustain the services that our residents need and deserve. The water and wastewater systems are the city’s most valuable assets, so it makes sense to utilize them for our residents.”
Other outstanding issues in the bankruptcy involving unions, retirees and other creditors will continue to be negotiated in mediation. Their resolution will be addressed in supplements to the Plan of Adjustment.
The filing of the Plan of Adjustment comes after almost thirty years of state oversight of Chester, four years of receivership and two years of bankruptcy. Since being confirmed as Receiver in June 2020, Doweary and his team have heard the concerns expressed regarding asset monetization. Much of this input has been incorporated in this plan that could lead to the generation of sustaining annual revenue, long lacking in the city, while protecting ratepayers by keeping the water, stormwater and sewer system under public control.
Under the plan filed in U.S. Bankruptcy Court, the City of Chester would seek a request for proposals from third parties to acquire, manage or operate the assets of the Chester Water Authority, the assets of the Chester Stormwater Authority and the City’s reversionary sewer assets in DELCORA.
The City intends to commence the RFP process in the near future in the ordinary course of its day-to-day functions. The process will be conducted in accordance with applicable law and directed by the Receiver pursuant to the authority provided to the Receiver under Act 47 and the Recovery Plan.
The monetization proposal is the single most important part of the Receiver’s strategy to ensure Chester avoids extreme cuts in service that would disrupt the lives of its residents. Moreover, without monetization, Chester lacks the ability to address its significant financial obligations.
Monetizing water, stormwater and wastewater systems, while maintaining public oversight, has been accomplished elsewhere and provides a layer of protection for customers of the water system.
###