A rebellion by Montgomery County residents unhappy with the privatization of their city’s sewer system moved into uncharted territory this month by creating a commission to rewrite the city’s governing charter to block the sale of the city’s wastewater utility.
The Towamencin City Government Study Commission, which was created after 61% of voters approved it in November, wants to draft a home-rights charter to make it illegal to transfer the city’s sewer system to a private buyer. We hope to get the proposal before the voters in May. If approved, it will create an immediate barrier to the sale of public utility assets in the borough of 18,000 people that borders Lansdale.
The potential change to Towamencin’s local government constitution may be the most dramatic step opponents in suburban Philadelphia have taken to prevent the sale of publicly owned utilities, which has surged since the passage of a 2016 state law known as Act 12. The law was designed to encourage consolidation of public water supply and utility companies in private ownership. That has sparked bidding wars for city utilities, and also pushback from customers whose rates have risen dramatically, in part to compensate customers for the high cost of acquisition.
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It’s unclear whether the new legal strategy can overturn the Towamencin Board of Supervisors’ May 4-1 decision to sell the city’s sewer system to NextEra Water, the Florida-based energy and utility giant that is expanding into Pennsylvania. But the new charter, if approved, could at least tie up the transaction in court for years and, if successful, could pave the way for other cities seeking to prevent privatization.
“If the charter change is approved and they continue to sell, they will definitely be sued,” said Kofi Osei, who was elected to the study commission and appointed its chairman. But if the township tries to void the contract to sell the property, NextEra Water could also sue the township for breach of contract.
“Obviously it hasn’t been tested, but we think it has a good chance of standing up to the challenge,” said Lauren Gallagher, an attorney advising the commission on the study. Gallagher is a partner at Rudolph Clarke LLC, a suburban Philadelphia law firm that represents cities and municipal governments.
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“A home rule charter is a big hammer to one issue,” said Gerald E. Cross, senior research associate at the Central Pennsylvania Economy League in Harrisburg, who has advised several municipalities and counties that have adopted home rule charters. “But if it’s a big problem, it’s the voters who decide to swing that hammer.”
Towamencin project organizers say they launched a campaign to change the charter after elected city officials defied protests and voted to sell the system to Next Era Water, whose $115.3 million bid was 25% higher than the next highest bidder. NextEra owns no other utilities in Pennsylvania and appeared to be overpaying for the system to establish a base in the state.
Towamencin officials said the decision to sell the sewer system was a no-brainer: An infusion of cash from NextEra would allow the city to pay down its debt and finance projects for years to come, and get out of running a utility that’s best left to private industry. Superintendent Richard Marino called the sale “a generational opportunity to restart and reset our finances for the foreseeable future.”
But opponents saw the sale as a mechanism for city officials to sign a blank check on the backs of wastewater buyers, a tax increase disguised as a sewer rate increase to benefit private investors.
“This looks like something that home rule is meant to do,” Osei said. If successful, he hopes Towamencin’s home rule campaign will become a model for other cities opposed to utility privatization, though he suggests they pass the measure preemptively, rather than waiting for elected officials to quietly initiate utility sales.
Towamencin activists said they were inspired by the 2020 effort in Norristown, where the borough council voted to sell its sewer system for $82 million to Bryn Mawr-based Aqua Pennsylvania, the largest private water operator in suburban Philadelphia. A civic opposition group has collected more than 2,000 signatures to force the annulment of the referendum vote. Aqua left rather than face a likely defeat in the election.
Norristown already had a home rule charter that allowed for a referendum. Residents of municipalities like Towamencin, which operate under state rules, do not have the same power to repeal the measures.
A Norristown opposition group, Neighbors Opposing Privatization Efforts, or NOPE, helped organize a public awareness campaign in Conshohocken against the proposed sewer sale in 2021, prompting the city council to abruptly end sales talks. NOPE also advised Towamencin residents.
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The lesson from Montgomery County is that one of the most powerful tools for thwarting a sale is organizing political opposition before the governing body makes a formal decision to privatize. That was evident this year in Bucks County, where the Bucks County Water and Sewer Authority announced in July that it had agreed to negotiate exclusively with Aqua to sell its sprawling system for $1.1 billion. The Bucks County Commission canceled the deal just two months later after local elected officials and the public voiced strong objections.
But in several cities, residents only noticed the sale of the sewer system after the transactions were approved by the Pennsylvania Public Utilities Commission (PUC), which reviews whether the deal is in the public interest and determines how much of the sale price the buyer can get in rates. So far PUC has not rejected any acquisition under Law 12.
The PUC approved a statewide rate increase for Aqua Pennsylvania this year, leading to a 98% increase in customer bills in the five cities whose sewer systems Aqua took over in recent years. In New Garden Township, Chester County, the first municipal utility acquired under Act 12, bills have risen 90% this year, and several outraged residents have filed formal complaints with the PUC.
Leaders of New Garden’s opposition citizen group Keep Water Affordable, which was formed only after the sale was completed, acknowledge that little can be done now to reverse the sale.
“We’re at a turning point here as to what we’re going to do next,” said Bill Ferguson, leader of the New Garden opposition group. Its leaders are focusing more of their energy on trying to rally public support to block Aqua’s proposed $410 million takeover of the Chester Water Authority, which would affect New Garden and 32 other towns in Chester and Delaware counties. That sale is being contested in the Pennsylvania Supreme Court.
In another Chester County community, Willistown Township, opponents of the city’s $17.5 million sale of Aqua are relying on a Commonwealth Court appeal filed in August by the Pennsylvania Office of Consumer Advocate, which challenged the PUC’s approval of the sale. The consumer advocate says the sale will not deliver “affirmative public benefits” and will instead hurt all higher-rate Aqua customers.
Opponents of the sale are pressing Willistown supervisors to terminate the contract under a provision in the Aqua contract, which allows either party to cancel the contract if it is not executed by early 2023. Molly Perrin, who was elected to the board of supervisors in 2021 after the purchase was signed, said that they will vote to terminate the contract. The other two supervisors, who voted in favor of the sale, showed no change of heart. William R. Shoemaker, the board’s chairman, declined to comment through a spokesman.
In Towamencin, the self-government charter campaign strained community relations.
Opponents of the Towamencin charter campaign — they don’t actually call themselves sewage sale supporters — questioned the community commitment of their neighbors who organized the charter campaign. They focused on Osei, whose parents are immigrants from Ghana. He was born in Kansas and moved to Towamencin about three decades ago as a child. Osei is also a member of the Democratic Socialists of America, a left-wing political party, as is David McMahon, who founded NOPE in Norristown.
“It scares me,” said Mary Becker, vice chairwoman of the Montgomery County Republican Committee, who led unsuccessful efforts to defeat the charter vote in November under the banner of TRUST, or Township Residents United Serving Towamencin. “I volunteer with a lot of people who came from socialist countries and they are terrified that our country is leaning towards socialism.”
Osei dismissed Becker’s comments. “Project NOPE is very much non-partisan,” he said. Osei said he was the only Democratic Socialist on the government study committee’s list of seven candidates, which he said included two registered Republicans. “Anything the commission does would have to be communicated to the voters,” he said.
Towamencin’s proposed charter change would be modeled after a 2018 measure approved by Baltimore voters that prohibits the privatization of its water and wastewater systems. Osei said the charter change committee intended to draft a homestead charter that would change as little as possible the existing municipal administration, apart from prohibiting the transfer of communal property to private owners, which Towamencin still needs to do to complete the sale.
“This is a big process and we are trying to do it in three months,” he said. “We don’t want to make big changes that may not be what we want. I think we might lose some votes if the changes are too big.”