Chester receiver sues DELCORA over proposed sale

MEDIA COURTHOUSE – Chester Receiver Michael Doweary has filed suit against the Delaware County Regional Water Control Authority, seeking a declaratory judgment that ownership of the city’s sewer system would revert back to Chester in the event of a sale to a third party unless DELCORA properly compensates the city for those assets.

The complaint filed in Delaware County Common Pleas Court last week also seeks a determination that Chester is entitled to additional compensation in the event of a sale under an easement agreement with the authority.

Chester Receiver Michael T. Doweary

Attorneys for DELCORA did not respond to requests for comment Wednesday.

“The purpose of the complaint is to ensure the City of Chester’s rights are protected in the event that DELCORA is sold or ceases to provide the services it is currently providing,” said Doweary’s chief of staff, Vijay Kapoor. “We’re asking for the ability, in the event that it’s sold, that adequate compensation is provided to the city or that the assets revert (back to Chester).”

DELCORA, which treats wastewater for approximately 500,000 customers in 42 municipalities in Delaware and Chester counties, entered into a $276.5 million Asset Purchase Agreement with Aqua Pennsylvania Wastewater Inc. in September 2019.

The sale was expected to help push back looming costs for customers over the next decade through a “rate stabilization plan.”

Aqua is currently awaiting a determination from the Pennsylvania Public Utility Commission on that proposed sale. DELCORA meanwhile raised rates 12.5 percent this year, about a $50 average increase for customers, which it blamed on the delay in finalizing the sale.

Delaware County Council moved to block the sale in court, arguing DELCORA had improperly amended its bylaws to allow for the creation of a trust, and passed an ordinance directing DELCORA to wind up operations and transfer its assets, funds and liabilities to the county.

Council angle

Common Pleas Judge Barry Dozor ruled in December 2020 that council could dissolve DELCORA, but only after the valid and enforceable APA was finalized. A three-judge panel of the Commonwealth Court largely reversed that ruling in March.

There was a wrinkle to that opinion, however.

While Delaware County does have statutory authority over DELCORA under the Municipality Authorities Act and its ordinance is valid and enforceable, the Commonwealth Court ruled, it would also assume a “contractual assignment” from DELCORA as a matter of law and “would, without question or condition, be bound by the terms and conditions of the Asset Purchase Agreement, just as if it were DELCORA itself in the sense that it would essentially become a ‘party’ to a contract.”

“What the Commonwealth Court makes clear is that the decision about dissolution doesn’t sit with the DELCORA board, it sits with the county,” said county Solicitor Bill Martin. “The enforceability of the contract remains in question because it hasn’t received the approval from the PUC, but also because there are remaining issues in the litigation between the county and DELCORA.”

The case has been remanded to Judge Dozor for an order in line with the Commonwealth Court decision, but Dozor said in a scheduling an order last month that he has received conflicting proposed orders from the parties and has set a hearing for Sept. 7 to hash out those issues.

Receiver angle

Doweary, meanwhile, claims DELCORA is still bound by the terms of a 1973 agreement of sale to DELCORA for “all of the city’s property constituting the city’s sewer system and related property,” according to the complaint.

The agreement was updated in 1986 and remains in force until Nov. 17, 2022, “and thereafter for a term as long as the existence of DELCORA ‘unless terminated by either party on one year’s notice prior to the end of the then-current term,’ ” the complaint says.

Because no notice was provided by Nov. 17, 2021, Doweary contends the agreement is still in effect and provides that: “If, at any time in the future … (DELCORA) ceases to operate the system … then the fixed assets and the real property, other than the Treatment Plant and (certain other facilities), revert to the (city’s) ownership rather than to the County of Delaware or any other agency.”

The complaint argues that DELCORA does not have the authority to assign its obligations under that agreement without the consent of the City of Chester, and no such consent has yet been given.

Doweary additionally claims the city has made certain capital contributions to DELCORA over the years that are not contemplated by the Aqua sale and granted DELCORA an easement agreement in 2014 that requires the authority to pay Chester 10% of any proceeds DELCORA receives from the sale or lease of the easement to any third party.

The easement agreement also provides that DELCORA must provide the city notice of its intent to close a sale or enter into a lease agreement for the easement, but Chester has not received any such notice for that either, according to the complaint.

“DELCORA and Aqua (and possibly the PUC) are ignoring the contributions of the city and other customers to the value of the property proposed to be acquired by Aqua,” the complaint says. “To the extent that the PUC approves this transaction under the APA and permits Aqua and DELCORA to ignore the value of property contributed by the city to DELCORA, as well as the city’s reversionary interest and the proceeds due the city under the easement agreement, the PUC would unlawfully impair the city’s reversionary interest and rights under the easement agreement.”

The Aqua angle

Aqua, which is not a party to the complaint, said in a statement that it had only recently reviewed a copy of the lawsuit has not had a chance to thoroughly review it in order to make a substantive comment.

“We are aware of similar relief the receiver sought before the PUC but the PUC determined he was not permitted to participate in that process,” the statement said. “We previously asked the receiver several times for a list of the supposed assets potentially subject to the old agreement, and the supposed valuation of those assets. To date, we have not received a response.”

Martin, the county solicitor, said the county is also aware of the receiver’s filing but is likewise not a party to it.

He noted that in order for the dissolution to become effective, DELCORA will have to furnish to the county a certificate to that effect, which then must be filed with the appropriate body.

“The county is not compelled to file it and the circumstances involving the pending Aqua transaction need to be clarified by the courts and by the Public Utility Commission before the county can make long-term decisions regarding the future of the DELCORA assets,” Martin said. “There are no plans to do that, pending clarification of the other legal actions that are ongoing.”

Doweary is still contemplating selling the Chester Water Authority to Aqua in a proposed $410 million deal in order to shore up the city’s pension obligation woes and other financial issues, according to Kapoor.

Delaware County Court of Common Pleas Judge Spiros Angelos ruled in April 2020 that any such sale would have to be approved by Chester County, Delaware County and the City of Chester, the three entities that make up CWA’s board.

The Commonwealth Court reversed that ruling in September, finding Chester is the sole owner of the authority.

The case is currently pending before the Pennsylvania Supreme Court and briefing in that case is about three-quarters of the way done, according to CWA solicitor Francis Catania.

Source link

Related posts

TriCounty Area Chamber hosting former Olympian at annual dinner

businesegoal

France goes to the polls as Macron battles left in key parliamentary elections

businesegoal

New CEO takes the helm at Lincoln Financial Group

businesegoal

Leave a Comment