In Re: Chester Water Authority Trust ~ Appeal of: City of Chester ( 2021 )

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
In Re: Chester Water Authority Trust :
:
: No. 489 C.D. 2020
Appeal of: City of Chester :
In Re: Petition for Approval of :
Declaration of Trust Under :
Pennsylvania Law and the Transfer :
of Legal Title to Certain Assets to :
the Trust : No. 504 C.D. 2020
:
Appeal of: Aqua Pennsylvania, Inc. :
City of Chester, :
Appellant :
: No. 514 C.D. 2020
v. :
:
Chester Water Authority :
In Re: Petition for Approval of :
Declaration of Trust Under :
Pennsylvania Law and the Transfer :
of Legal Title to Certain Assets to : No. 685 C.D. 2020
the Trust :
: Argued: November 10, 2020
Appeal of: Aqua Pennsylvania, Inc. :
BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge1
HONORABLE RENÉE COHN JUBELIRER, Judge
HONORABLE P. KEVIN BROBSON, Judge
HONORABLE PATRICIA A. McCULLOUGH, Judge
HONORABLE ANNE E. COVEY, Judge
HONORABLE MICHAEL H. WOJCIK, Judge
HONORABLE ELLEN CEISLER, Judge
1
This case was assigned to the opinion writer before Judge Brobson succeeded Judge Leavitt
as President Judge.
OPINION BY
JUDGE McCULLOUGH FILED: September 16, 2021
In these consolidated appeals from orders that involve an issue of law that
was certified by the Court of Common Pleas of Delaware County (trial court) and
accepted by this Court for review pursuant to Pa.R.A.P. 1311(b), the City of Chester
(City) and Aqua Pennsylvania, Inc. (Aqua) appeal from the April 24, 2020 orders of
the trial court, which, in relevant part, denied the motions for judgment on the pleadings
filed by the City and Aqua in two separate but related actions.
The narrow issue for our consideration is whether section 5622(a) of the
Municipality Authorities Act (MAA),2 53 Pa.C.S. §5622(a), authorizes (or, more
appropriately, continues to authorize) a municipality to obtain the assets of a water
authority that it created—a water authority that eventually expanded to provide water
services outside the borders of the municipality and into other counties—in light of
section 1 of Act 73 of 2012,3 which added section 5610(a.1) to the MAA, 53 Pa.C.S.
§5610(a.1.), and transformed the governance structure of such an authority. Upon
review, we conclude that section 5610(a.1) did not abrogate, supersede, or otherwise
alter a municipality’s longstanding power under section 5622(a) and its statutory
predecessors to unilaterally obtain an authority and/or its assets, and, accordingly, we
reverse the orders of the trial court and remand for further proceedings.4
2
53 Pa.C.S. §§5601-5623.
3
Act of June 27, 2012, P.L. 653, No. 73, §1.
4
We emphasize the very limited nature of the issue before this Court. In this case, we decide
only whether a municipality, under section 5622(a), possesses the general authority to obtain the
assets of an authority that it created. We do not decide the manner or extent to which a municipality
can utilize or exercise such authority.
2
As gleaned from the pleadings and the trial court’s opinion, the facts and
procedural history of these cases may be summarized as follows. In 1939, after our
General Assembly adopted the MAA of 1935 (1935 MAA),5 the City incorporated the
Chester Municipal Authority as a water authority. In 1965, the City enacted an
ordinance that changed the name of the authority to the Chester Water Authority
(Authority). In 1965, and again in 1998, the City renewed the Authority’s charter in
accordance with the 1945 MAA.
Originally, the Authority provided water services to customers solely in
the City, but later expanded its services beyond the City into Delaware County and the
southern part of Chester County, where the Authority’s water system assets are
currently sited. As noted by the trial court, “[t]he Authority commenced in 1939 with
67 customers in the City and it presently serves over 200,000 customers in 33 separate
municipalities located in Chester and Delaware County. Approximately 21[%] of [the
Authority’s] customers reside in the City.” (Trial court op. at 4.)
From 1939 to 2012, in accordance with the provisions of the 1935 MAA
and 1945 MAA, the City appointed all five directors of the Authority’s governing body,
and its members were from the City. After section 5610(a.1) of the MAA became
effective on August 27, 2012, the composition of the Authority’s governance structure
changed to a nine-member body. Pursuant to section 5610(a.1) of the MAA, the
governing body of the Authority consists of three members from the City, three
members from Chester County, and three members from Delaware County.
5
Act of June 28, 1935, P.L 463, No. 191. The 1935 MAA was simultaneously repealed and
replaced by the Municipality Authorities Act of 1945 (1945 MAA), Act of May 2, 1945, P.L 382,
No. 164, as amended, formerly 53 P.S. §§301-322. Later, section 3 of the Act of June 19, 2001, P.L.
287 (2001 Act), repealed the 1945 MAA and replaced the 1945 MAA with the current MAA.
3
In 2017, Aqua made an unsolicited bid to purchase the Authority in the
alleged amount of $320,000,000. At that time, the Authority’s nine-member board, or
governing body, voted unanimously to reject the offer. The City, facing financial
hardships, then started to explore methods to monetize the assets of the Authority.
On January 24, 2019, the Authority executed a declaration of trust, naming
the Authority as the settlor and three of its board members as trustees. By its terms,
the trust contemplated that the Authority would transfer its assets into the trust.
On March 1, 2019, the Authority filed a petition in the trial court seeking
approval of the declaration of trust and transfer of the Authority’s assets into the trust.
Thereafter, various answers, new matters, and objections to the petition were filed by
interested parties, including the City and Aqua. After the pleadings were closed, Aqua
and the City filed separate motions for judgment on the pleadings in the trust petition
action. In short, Aqua and the City asserted that the Authority’s petition should be
denied because, as a matter of law, only the City had the power to transfer the
Authority’s assets under section 5622(a) of the MAA.
Meanwhile, on August 13, 2019, the City filed an amended complaint in
the trial court against the Authority, seeking, inter alia, a declaratory judgment that
section 5622(a) of the MAA vested it with the statutory authority to unilaterally obtain
and sell the Authority. The City also sought an injunction enjoining the Authority from
interfering with the City’s right to sell the Authority’s assets, from encumbering or
dissipating the Authority’s assets, and from burdening the Authority’s assets with any
new debt. The Authority filed a responsive pleading, and the City later moved for
judgment on the pleadings in the declaratory judgment action.
By order dated April 24, 2020, the trial court denied the City’s motion for
judgment on the pleadings in the declaratory judgment action. By separate order dated
4
April 24, 2020, in the trust petition action, the trial court denied the motions for
judgment on the pleadings filed by the City and Aqua. The reasoning utilized by the
trial court, common to both cases, was as follows:
18. The 2012 legislative amendment to [s]ection 5610(a.1)
established the City [], the County of Chester, and the County
of Delaware as the governing body of the [Authority].
19. This amendment requires that any conveyance of the
[Authority] pursuant to [s]ection 5622(a) be conducted and
authorized by the City [], the County of Chester, and the
County of Delaware as the governing body which has the
power collectively to establish, maintain, or operate the
projects of the [Authority].
(Trial court op. at 6.) Ultimately, the trial court concluded “that any transfer of all [the
Authority’s] assets be conducted solely by the governing body, to wit, the City [],
Delaware County[,] and Chester County in unison pursuant to [s]ections 5610(a.1) and
5622(a) of the MAA.” Id. at 7.
Subsequently, the City and Aqua filed separate applications to amend the
trial court’s April 24, 2020 orders to set forth a statement that its interlocutory orders
involved a controlling question of law as to which there was a substantial ground for
difference of opinion and that an immediate appeal from the orders could materially
advance the ultimate termination of the cases. See section 702(b) of the Judicial Code,
42 Pa.C.S. §702(b). In an order dated May 21, 2020, the trial court granted the
applications and amended its April 24, 2020 orders accordingly. The City and Aqua
then filed petitions for permission to appeal in this Court, see Pa.R.A.P. 1311(b), in
both the trust petition case and the declaratory judgment case. On June 24, 2020, this
Court granted the permissions to appeal in a per curiam order. As stated in that order,
we accepted the following, sole issue for review in the trust petition case:
5
Whether the 2012 amendment[] to the [MAA], establishing
the City [], Chester County, and Delaware County as the
governing body of the [Authority], require[s] that any
conveyance of the Authority’s assets pursuant to the [MAA]
be conducted and authorized by the governing body rather
than solely by the City [].
(Order, 6/24/2020, at 2.)
In our per curiam order, we also accepted a substantially similar, if not
identical, issue for our review in the declaratory judgment case, which we phrased as
follows:
[Whether] the 2012 legislative amendment to [s]ection
5610(a.1) [of the MAA] established the City of Chester, the
County of Chester, and the County of Delaware as the
governing body of the [Authority and whether] [t]his
amendment requires that any conveyance of the [Authority]
pursuant to [s]ection 5622(a) be conducted and authorized by
the City of Chester, the County of Chester, and the County
of Delaware as the governing body which has the power
collectively to establish, maintain or operate the projects of
the [Authority].
Id.6
6
As an aside, and as noted by the trial court, in addition to the trust petition case and the
declaratory judgment case, there are two other civil actions related to this matter that are currently
pending in the civil and orphans’ divisions of the Court of Common Pleas of Delaware County, and,
in total, the parties currently have eight appeals pending in this Court (aside from the ones we granted
petitions for permission to appeal), which were stayed by agreement of counsel. (Trial court op. at
2-3.) Notably, in our June 24, 2020 per curiam order, we directed that “[a]ll proceedings in this
matter before the Court of Common Pleas of Delaware County are stayed pending resolution of
[these] appeals.” (Order, 6/24/2020, at 3.)
Moreover, in the background of this litigation, the Secretary of the Community and Economic
Development (CED) filed an application in our original jurisdiction for the appointment of a receiver
for the City in pursuant to the Municipalities Financial Recovery Act (Act 47), Act of July 10, 1987,
P.L. 246, No. 46, as amended, 53 P.S. §§11701.101-11701.712. See generally Davin v. City of
(Footnote continued on next page…)
6
Discussion
In its appellate brief, the City highlights the legislative and legal history
of section 5622(a) of the MAA, particularly the case law that construed the former
version of section 5622(a) in the 1945 MAA, the apparent legislative adoption of that
case law in reenacting the MAA in 2001, and the subsequent case law that developed
in interpreting section 5622(a) of the MAA. According to the City, this body of law
conclusively establishes that section 5622(a) of the MAA vests it (the City) with the
unfettered power to unilaterally transfer the Authority, and all of its assets, on the City’s
own free will and terms without any input from the Authority itself. The City also
asserts that the relatively recent amendment codified in section 5160(a.1) of the MAA
does not provide the Authority with any foundation upon which to conclude that our
General Assembly divested the City of its statutory power to transfer or otherwise
control the Authority as a municipal entity that it created. For its part, Aqua advances
arguments that are largely duplicative of that forwarded by the City. Upon review, we
find merit in this line of argumentation.
Chester (Pa. Cmwlth., No. 336 M.D. 2020, filed June 22, 2020) (unreported) (Davin I). In Davin I,
a judge from this Court noted that the City had been designated as a distressed municipality under
Act 47 since 1995; the City adopted a recovery plan in 1996; and, due to difficult and changing
economic conditions, the City filed amendments to the recovery plan in 2006, 2013, and 2016. Id.,
slip op. at 1-2, 9. This Court further explained that, as a result of the City’s continuing financial crisis,
Governor Tom Wolf issued a Declaration of Fiscal Emergency as to the City on April 13, 2020. Id.
Ultimately, this Court concluded that the “City [was] projected to be insolvent within 180 days[] and
[was] unable to ensure the continued provision of vital and necessary services,” and, on June 22,
2020, we granted CED’s petition, appointed a Receiver for the City, and ordered the Receiver to file
a recovery plan within 30 days of our order. Id., slip op. at 6, 9. Then, on June 7, 2021, this Court
entered an order confirming the 2021 Revised Recovery Plan filed by the Receiver, concluding that
the plan, inter alia, “contains a number of initiatives that set forth short- and long-term strategies to
address structural issues” and “proposes certain initiatives . . . to address the fiscal emergency and
continue to provide necessary and vital services in the City.” Davin v. City of Chester (Pa. Cmwlth.,
No. 336 M.D. 2020, filed June 7, 2021) (unreported) (Davin II), slip op. at 6-7.
7
We begin with a review of section 5622(a) of the MAA, in its current
iteration, and proceed to the history of that section as it appeared in preceding versions
of the MAA.
Titled “[c]onveyance by authorities to municipalities or school districts of
established projects,” section 5622(a) of the MAA presently states as follows:
(a) Project.--If a project established under this chapter by a
board appointed by a municipality is of a character which the
municipality has power to establish, maintain or operate and
the municipality desires to acquire the project, it may by
appropriate resolution or ordinance adopted by the proper
authorities signify its desire to do so, and the authorities shall
convey by appropriate instrument the project to the
municipality upon the assumption by the municipality of all
the obligations incurred by the authorities with respect to that
project.
53 Pa.C.S. §5622(a).
In Clearfield Borough v. Clearfield Borough Park Authority, 285 A.2d
532 (Pa. Cmwlth. 1971), affirmed, 301 A.2d 372 (Pa. 1973) (per curiam), this Court
interpreted former section 18(A) of the 1945 MAA, formerly 53 P.S. §321(A), which
contains language that is virtually identical to current section 5622(a) of the MAA.7 In
7
Specifically, former section 18(A) of the 1945 MAA read as follows:
If a project shall have been established under this act by a board
appointed by a municipality or municipalities, which project is of a
character which the municipality or municipalities have power to
establish, maintain or operate, and such municipality or municipalities
desire to acquire the same, it or they may by appropriate resolution or
ordinance adopted by the proper Authorities, signify its or their desire
to do so, and thereupon the Authorities shall convey by appropriate
instrument said project to such municipality or municipalities, upon the
assumption by the latter of all the obligations incurred by the
Authorities with respect to that project.
Formerly 53 P.S. §321(A) (emphasis added).
8
that case, a borough established a park authority in 1955 to acquire, maintain, improve,
and operate certain park property. The authority acquired park property in 1958 and
operated and maintained it. In 1970, the borough passed an ordinance indicating its
desire to obtain the authority’s property and demanding conveyance of the property to
the borough. The authority refused, and the borough filed an action in mandamus,
seeking to compel the conveyance. The court of common pleas, construing the phrase
“adopted by the proper authorities,” concluded that former section 18(A) required “that
a resolution must be passed by the [a]uthority approving the transfer of the project
property before the municipality can acquire the property.” 285 A.2d at 533. As such,
the court of common pleas denied the borough’s mandamus petition.
On appeal, this Court reversed. Acknowledging that the term
“authorities” was ambiguous, we analyzed the legislative intent behind former section
18(A), and, focusing upon the plain language of the statute, this Court, in pertinent part,
proffered the following reasoning in support of our disposition:
After first establishing the subject matter (“project
established by a board” which “the municipality or
municipalities have power to establish”), the statute next sets
forth the words which give the section its purpose (“such
municipality or municipalities desire to acquire the same”).
Immediately following this are words describing how the
purpose is accomplished (“it or they may by appropriate
resolution or ordinance”). The words, “it or they” are
pronouns referring back to the nearest nouns preceding them,
which are “municipality or municipalities.” The next words
“adopted by the proper Authorities[,]” being a part of the
same phrase[,] must also refer to those governmental bodies
which can pass the resolution or ordinance. This analysis is
further aided by the next phrase, “signify its or their desire to
do so,” for here the only party (or parties) whose desire sets
in motion this process is the municipality or municipalities.
....
9
This analysis leads to only one conclusion, and that is that
the Legislature intended that the resolution or ordinance
should be adopted by the proper authorities [], meaning the
municipality or municipalities.
We also note that the Legislature in [s]ection 18[(A)], used
the terms “resolution or ordinance.” We can find nothing in
the statute which would permit an authority organized under
[the 1945 MAA] to pass an ordinance. An authority
throughout this [a]ct may pass a resolution, but nowhere may
it pass an ordinance. For this additional reason, we hold that
the Legislature intended to permit a transfer of authority
property by the unilateral action of a municipality or
municipalities.
....
Based upon the above analysis of [s]ection 18[(A)] of the
[1945 MAA], we hold that the legislative intent is to permit
the [b]orough to obtain the project property of the [a]uthority
by the passage of a borough resolution or ordinance
expressing a desire to acquire such property and to assume
all the obligations applicable to the property being acquired,
and therefore we must reverse the court below.
285 A.2d at 534-35 (emphasis in original).
Decades later, in 1995, in Forward Township Sanitary Sewage Authority
v. Township of Forward, 654 A.2d 170 (Pa. Cmwlth. 1995), a township organized and
incorporated a sewage authority to undertake sanitary sewage projects in the township.
The township later enacted a resolution to dissolve the authority and directed the
authority to convey to the township all property in which the authority had any right
and title. In upholding the validity of the township’s resolution under former section
18(A) of the 1945 MAA, we reaffirmed our holding in Clearfield Borough that section
18(A) evinced that “the legislature intended to permit a transfer of authority property
by the unilateral action of a municipality in enacting a resolution” and “that there is no
10
requirement that the authority itself authorize the transfer of property.” Forward
Township Sanitary Sewage Authority, 654 A.2d at 174. We further added that,
“pursuant to [former] section 18(A), a municipality may, by ordinance, impose upon
an authority the duty of executing the necessary documents for a transfer of all of the
authority’s property to its creating municipality.” Id. at 174-75. Ultimately, this Court
concluded that “[the] [a]uthority was not required to approve of the transfer of property
from [the] [a]uthority to [the] [t]ownship” because the township, alone, possessed that
right as a matter of statutory law. Id. at 175.
Then, in Township of Forks v. Forks Township Municipal Sewer
Authority, 759 A.2d 47 (Pa. Cmwlth. 2000), we reiterated that section 18(A) of the
1945 MAA and our settled case law “lead to the inescapable conclusion that for the
purpose of dissolving an authority[,] a municipality has the power to unilaterally direct
its authority to transfer authority property without the consent of the authority.” Id. at
54.
In 2001, our General Assembly repealed the 1945 MAA and replaced it
by adding the MAA in Chapter 56 to the Pennsylvania Consolidated Statutes. See
supra note 5. Significantly, section 2 of the 2001 Act provides that “[t]he provisions
of [the MAA], so far as they are the same as those of existing laws, are intended as a
continuation of such laws and not as new enactments.” Id. Further, section 4 of the
2001 Act states, in part, “that . . . decisions which were made under the [1945 MAA]
shall remain in full force and effect until revoked, vacated or modified under [the
MAA].” Id. Thus, in reenacting the 1945 MAA in its current version in the
consolidated statutes in what is now known as the MAA, the General Assembly
expressed its clear intent to preserve existing case law interpreting the 1945 MAA,
unless or until a provision of the MAA provides to the contrary.
11
Following the statutory recodification of the MAA in 2001, this Court
issued our decision in Salem Township Municipal Authority v. Township of Salem, 820
A.2d 888 (Pa. Cmwlth. 2003). There, albeit in passing, we reconfirmed that, based on
its plain language, current section 5622(a) of the MAA “authorized the [t]ownship to
dissolve the [a]uthority.” Id. at 890 n.1.
Against this backdrop and historical framework, the General Assembly
passed Act 73 of 2012, which added subsection (a.1) to section 5610 of the MAA.
Placed in its proper statutory context, the provision that has always been titled,
“[g]overning body,” including within the 1945 MAA, now reads as follows with the
additional language highlighted:
(a) Board.--Except as set forth in subsection (a.1), the
powers of each authority shall be exercised by a board
composed as follows:
(1) If the authority is incorporated by one municipality, the
board shall consist of a number of members, not less than
five, as enumerated in the articles of incorporation. The
governing body of the municipality shall appoint the
members of the board, whose terms of office shall commence
on the effective date of their appointment. One member shall
serve for one year, one for two years, one for three years, one
for four years and one for five years commencing with the
first Monday in January next succeeding the date of
incorporation or amendment. If there are more than five
members of the board, their terms shall be staggered in a
similar manner for terms of one to five years from the first
Monday in January next succeeding. Thereafter, whenever a
vacancy has occurred by reason of the expiration of the term
of any member, the governing body shall appoint a member
of the board for a term of five years from the date of
expiration of the prior term to succeed the member whose
term has expired.
....
12
(a.1) Water authorities and sewer authorities.--If a water
or sewer authority incorporated by one municipality
provides water or sewer services to residents in at least
two counties and has water or sewer projects in more
than two counties where the combined population of the
served municipalities, excluding the incorporating
municipality, is at least five times the population of the
incorporating municipality, all of the following apply:
(1) Ninety days after the effective date of this subsection,
the governing body in existence on the effective date of
this subsection shall be replaced by a governing body
comprised of the following:
(i) Three members appointed by the governing body
from each county in which the services to residents are
provided. A member under this subparagraph must
reside in a town, township or borough, which receives
services from the authority.
(ii) Three members appointed by the governing body of
the incorporating municipality.
(2) A member serving under paragraph (1) shall serve for
a term of five years.
53 Pa.C.S. §5610(a)(1), (a.1), (2) (emphasis added).
Here, the trial court essentially determined that the addition of section
5610(a.1) to the MAA in 2012 somehow displaced the interpretive construction
provided to section 5622(a) of the MAA and its previous versions by this Court in
Clearfield Borough, Forward Township Sanitary Sewage Authority, Township of
Forks, and Salem Township Municipal Authority. The trial court concluded that section
5610(a.1) “requires that any conveyance of the [Authority] pursuant to [s]ection
5622(a) be conducted and authorized by the City[], the County of Chester, and the
County of Delaware” because, collectively, these governmental entities constitute the
13
“governing body of the [Authority]” and have “the power [] to establish, maintain, or
operate the projects of the [Authority].” (Trial court op. at 6.)
To determine whether the trial court’s conclusion is valid, this Court is
required to perform the familiar task of statutory interpretation. As oft stated,
“[s]tatutory interpretation is a question of law over which our standard of review is de
novo, and our scope of review plenary.” Commonwealth v. Kingston, 143 A.3d 917,
921 (Pa. 2016). The cardinal rule of all statutory interpretation is to ascertain and
effectuate the intent of the General Assembly. O’Rourke v. Department of Corrections,
778 A.2d 1194, 1201 (Pa. 2001). To accomplish that goal, “statutory language must
be read in context, that is, in ascertaining legislative intent, every portion of statutory
language is to be read together and in conjunction with the remaining statutory
language, and construed with reference to the entire statute as a whole.” Pennsylvania
Gaming Control Board v. Office of Open Records, 103 A.3d 1276, 1285 (Pa. 2014).
Where the words of a statute are clear and free from ambiguity, the legislative intent is
to be gleaned from those very words, and the plain language is not to be disregarded
under the pretext of pursuing its spirit. Pennsylvania Financial Responsibility
Assigned Claims Plan v. English, 664 A.2d 84, 87 (Pa. 1995); Coretsky v. Board of
Commissioners of Butler Township, 555 A.2d 72, 74 (Pa. 1989). “Only if a statute is
unclear may a court embark upon the task of ascertaining the intent of the legislature
by reviewing the necessity of the act, the object to be attained, circumstances under
which it was enacted and the mischief to be remedied.” Coretsky, 555 A.2d at 74.
Most significantly, our judicial interpretations set forth in the cases
mentioned directly above have become part of former section 18(A) of the 1945 MAA,
and, in the case of Salem Township Municipal Authority, section 5622(a) of the current
MAA. This is because “judicial construction of a statute is an authoritative statement
14
of what the statute meant before as well as after the decision . . . giving rise to that
construction.” Kendrick v. District Attorney of Philadelphia County, 916 A.2d 529,
538 (Pa. 2007) (internal citation omitted). Further, the General Assembly is “presumed
to be aware of the construction placed upon statutes by the courts.” City of
Philadelphia v. Clement and Muller, Inc., 715 A.2d 397, 399 (Pa. 1998). Thus, “[t]he
failure of the General Assembly to change the law which has been interpreted by the
courts creates a presumption that the interpretation was in accordance with the
legislative intent; otherwise the General Assembly would have changed the law in a
subsequent amendment.” Fonner v. Shandon, Inc., 724 A.2d 903, 906 (Pa. 1999).
As a threshold matter, then, this Court must assume that our decisions
interpreting former section 18(A) of the 1945 MAA, as well as section 5622(a) of the
MAA, correctly enunciated the principle of law that our General Assembly intended to
bestow within those statutory sections. As explained above, our decisions clearly held
that former section 18(A) of the 1945 MAA and section 5622(a) of the current MAA
provide a municipality with the unilateral authority to obtain the assets of an authority
it had created. “If the interpretation placed upon the statute for all these years was not
the interpretation intended by the legislature, it would have amended the section.”
Northeastern Building Registered v. Commonwealth, 399 A.2d 449, 452 (Pa. Cmwlth.
1979). Importantly, our General Assembly has not amended the 1945 MAA or section
5622(a) of the MAA with any material language that could call into question the
construction placed upon those statutes by this Court in cases beginning as early as
1971 and reaffirmed throughout the years, most recently in 2003.
Equally important is the proposition that “when the legislature, in
subsequent legislation, chooses to use the same disputed language as it had used in
previous legislation, and where, as here, that language has been interpreted . . . by a
15
court, the legislature may be presumed to have adopted [that] interpretation[].”
Northeastern Building Registered, 399 A.2d at 452. To be sure, “[o]ne of the most
venerable and fundamental tenets of statutory interpretation is that, whenever [a]
[c]ourt has interpreted the language of a statute, and the General Assembly
subsequently amends or reenacts that statute without changing that language, it must
be presumed that the General Assembly intends that [the] [c]ourt’s interpretation
become part of the subsequent legislative enactment.” Verizon Pennsylvania, Inc. v.
Commonwealth, 127 A.3d 745, 757 (Pa. 2015). Consequently, pursuant to these rules
of statutory construction, when our General Assembly recodified the 1945 MAA into
the current MAA and failed to insert or delete language in section 5622(a) that could
have had an effect on our judicial interpretations of former section 18(A) of the 1945
MAA, our General Assembly signified its intent to readopt our decisional law into
section 5622(a) of the MAA.
Even our General Assembly has said as much when it reenacted the MAA.
As noted above, section 2 of the 2001 Act provides that “[t]he provisions of [the MAA],
so far as they are the same as those of existing laws, are intended as a continuation of
such laws and not as new enactments.” Id. Further, section 4 of the 2001 Act states,
in part, “that . . . decisions which were made under the [1945 MAA] shall remain in
full force and effect until revoked, vacated or modified under [the MAA].” Id.Therefore, having established that section 5622(a) continues to vest the City with
statutory power to compel the conveyance of the Authority and all of its assets, the
issue becomes whether the addition of section 5610(a.1) has superseded that power.
We conclude that it has not.
16
To aid our resolution of this issue, we are guided by section 1933 of the
Statutory Construction Act of 1972 (SCA),8 which provides as follows:
Whenever a general provision in a statute shall be in conflict
with a special provision in the same or another statute, the
two shall be construed, if possible, so that effect may be
given to both. If the conflict between the two provisions is
irreconcilable, the special provisions shall prevail and shall
be construed as an exception to the general provision, unless
the general provision shall be enacted later and it shall be the
manifest intention of the General Assembly that such general
provision shall prevail.
1 Pa.C.S. §1933.
Upon review, we are unable to perceive a conflict, much less an
irreconcilable one, between the two statutory sections at issue, for, based upon their
plain language, the two can readily be interpreted in a state of harmony. With regard
to section 5622(a) of the MAA, we reaffirm our case law on the former and current
versions of the statutory section. As such, our above discussion of these cases
demonstrates that, as a matter of law, section 5622(a) confers upon a municipality, via
a duly enacted ordinance, the power to dissolve an authority and obtain and later
transfer and/or convey the authority’s assets as it deems fit, without any input on the
part of the authority. Moreover, we note that the title to section 5622(a) is denoted as
“[c]onveyance by authorities to municipalities . . . of established projects,” id.
(emphasis added), thereby marking a line of structural demarcation between a
municipality or municipalities and the authority or authorities that it or they have
created. See section 1924 of the SCA, 1 Pa.C.S. §1924 (stating that the “title . . . of a
statute may be considered in the construction thereof”). Notably, the MAA defines a
“municipality” as “[a] county, city, town, borough, township or school district of the
8
1 Pa.C.S. §§1501-1991.
17
Commonwealth.” Section 5602 of the MAA, 53 Pa.C.S. §5602 (Definitions). By
contrast, the MAA states that a municipality can establish and/or incorporate an
“authority,” see 53 Pa.C.S. §5603, and an “authority” is specified as “[a] body politic
and corporate created under this chapter; under the former [1935 MAA]; or under the
[1945 MAA].” 53 Pa.C.S. §5602 (Definitions).
By way of comparison, section 5610 is (and has always been) entitled,
“[g]overning body.” Like the version in the 1945 MAA, subsection (a) states and
describes, as a general theme, the “powers of each “authority” and how they “shall be
exercised by a board composed as follows.” 53 Pa.C.S. §5610(a) (emphasis added).
The statute then proceeds to detail the number of a board’s members, the manner in
which the “members of the board” are elected and the terms they serve, and the means
by which a vacancy is filled. Id. Tellingly, the MAA defines a “board” as “[t]he
governing body of an authority,” 53 Pa.C.S. §5602 (emphasis added), and not a
“municipality.” Viewing the statutory provisions in this overriding context, we
conclude that when our General Assembly amended section 5610(a) with the insertion
of subsection (a.1) in 2012, it was simply devising a particular scheme pertaining to
the composition of “the governing body” of a “water or sewer authority incorporated
by one municipality,” specifically an authority that “provides water or sewer services
to residents in at least two counties.” 53 Pa.C.S. §5610(a.1). In point of fact, akin to
subsection (a), subsection (a.1) goes on to delineate the number of “members” and
where (or in which municipality or county) they “must reside,” and, also, the
appointment process and terms of the new “governing body” or “board” of the
authority. 53 Pa.C.S. §5610(a.1)(1)-(2).9
9
We further note, as an aside, that the provisions within section 5607 of the MAA specifically
carve out the “purposes and powers” of “every authority incorporated” by a municipality, including,
(Footnote continued on next page…)
18
That said, it is clear to us that our General Assembly, in enacting
subsection (a.1), merely intended to reconfigure the numerical and geographical
organization of a “governing body” or “board” of a water authority that services more
than one county. In so doing, the General Assembly distributed and balanced the
representation of board members more fairly and equally among a single municipality
and other counties in the unique situation where one municipality creates and/or
incorporates an authority and that authority provides services to citizens in counties in
which the authority was not created and/or incorporated. However, and imperatively,
our General Assembly did not include any apparent language in subsection (a.1) that
could reasonably reflect an intent to displace or otherwise interfere with our settled
case law and the construction we have afforded to the former version of—and even the
current version of what is now—section 5622(a) of the MAA. “When confronted with
questions of statutory construction, the words of a statute are to be interpreted in light
of antecedent case law, and the legislative intent to effectuate a drastic change in the
law is not to be inferred by mere omission and implication.” Fonner, 724 A.2d at 906.
Ultimately, section 5622(a) can be read in tandem with section 5610(a.1) of the MAA
in a cohesive and consistent manner. While the former dictates the power of a
municipality to demand and obtain the conveyance of an authority and the assets it
possesses, the latter creates the authority’s governing body or board, which, per section
inter alia, the “powers necessary or convenient for carrying out” the “acquiring,” “maintaining,” and
“operating” of “[w]aterworks, water supply works,” and “water distribution systems” projects. 53
Pa.C.S. §5607(a)(10), (d). As part of its operational power, the governing body of an authority may
“acquire, purchase, hold, lease as lessee and use any franchise, property, real, personal or mixed,
tangible or intangible, or any interest therein necessary or desirable for carrying out the purposes of
the authority, and to sell, lease as lessor, transfer and dispose of any property or interest therein at any
time acquired by it.” 53 Pa.C.S. §5607(d)(4).
19
5607 of the MAA, manages and controls the daily and operational affairs of the
authority. See supra note 9.10
10
In response to the Dissent, per section 5610(a) of the MAA, an authority has always
possessed the statutory power, through its governing body or board, to manage and control the daily
and operational affairs of the authority. See 53 Pa.C.S. §5610(a)(1); section 7A(a) of the 1945 MAA,
formerly 53 P.S. §309A(a); see also Commonwealth ex rel. Waltman v. Graczyk, 460 A.2d 1098,
1099 n.1 (Pa. 1983); City Council of the City of Hazleton v. City of Hazleton, 578 A.2d 580, 582 (Pa.
Cmwlth. 1990). Even so, this Court has consistently held that section 5622(a) of the MAA and its
prior versions vest a municipality with the unilateral power to obtain the assets of an authority it has
created and incorporated. See Salem Township Municipal Authority, 820 A.2d at 890 n.1; Township
of Forks, 759 A.2d at 54; Forward Township Sanitary Sewage Authority, 654 A.2d at 174-75;
Clearfield Borough, 285 A.2d at 534-35. The Dissent acknowledges, and does not dispute, the
“continuity in our case” and concedes that the City, alone, created and incorporated the Authority. In
Re: Chester Water Authority, __ A.3d __, __ (Pa. Cmwlth., Nos. 489, 504, 514, and 685 C.D. 2020,
filed September 16, 2021) (Wojcik, J., dissenting), slip op. at 2. The Dissent also admits that no other
municipality has “later joined in the original incorporation” and, thus, the City remains the sole creator
and incorporator of the Authority. Id. at __, slip op. at 6. Yet, the Dissent would essentially overrule
30-plus years of case law construing section 5622(a), simply because section 5610(a.1) of the MAA
expanded the number of members of the governing body or board of an authority when that authority
services residents in more than one county. In so proposing, the Dissent fails to appreciate the
fundamental scheme and hierarchy of our government—i.e., that the City, as the “maker” of the
Authority, is theoretically the ultimate owner of the Authority. In other words, the Dissent’s position
is grounded on the unstated premise that a municipality can create an autonomous political
subdivision that possesses more power than the municipality itself. Although the Authority provides
water services into areas outside the boundaries of the City, in no way does this fact alter or otherwise
negate the fact that the City presumptively “owns” the Authority for purposes of section 5622(a). In
enacting section 5610(a.1), our General Assembly simply provided the other counties with “seats at
the table” of the governing body or board of the Authority. If the General Assembly wanted to convert
the Authority into a sovereign, multi-county, quasi-municipality, surely it would have expressed its
intention to do so in clear and unmistakable language.
In rebuttal, the Dissent insists that “the General Assembly has given the City and Counties,
not the Authority itself, equal power in determining what happens to the project as if they were part
of a joint authority.” Id. at __, slip op. at 9 (emphasis added). However, the Dissent is effectively
rewriting the MAA and judicially creating a de facto joint authority out of thin air. Significantly, the
Dissent cites and discusses the relevant statutory provisions of the MAA and the procedures to be
followed when two or more municipalities combine and create and incorporate a joint authority, and
when a non-incorporating municipality subsequently joins with an incorporating municipality to form
a joint authority. But, tellingly, the Dissent candidly admits that no such joint authority was created
in this case. In short, although Chester County and Delaware County now have representatives on
(Footnote continued on next page…)
20
In sum, at best, section 5610(a.1) is silent with respect to, and does not
directly touch upon, the subject matter of section 5622(a), which covers the conveyance
of property from an authority to a municipality when the municipality enacts an
ordinance demanding the conveyance. Absent a clear expression of legislative intent,
through the use of overt wordage, this Court will not infer that the lawmaking body
intended to effectively repeal one section of a statute through the enactment of another
section in the same statute; instead, a plain reading of section 5622(a) and section
5610(a.1) leads us to conclude, without hesitation, that the two statutory sections are
easily reconcilable. See Duda v. State Board of Pharmacy, 393 A.2d 57, 59 (Pa.
Cmwlth. 1978) (“Repeal by implication arises only where language used in the later
statute is irreconcilably repugnant to the provisions of the earlier statute so as
absolutely to preclude a consonant construction of both.”); see also Borough of
Collegeville v. Philadelphia Suburban 996 Water Company, 105 A.2d 722, 730 (Pa.
the board or body of the Authority by virtue of section 5610(a.1) of the MAA, Chester County and
Delaware County are not incorporating municipalities of the Authority and, thus, cannot be deemed
to be a “municipality” that possesses the power to obtain the assets of an authority under section
5622(a) of the MAA.
Finally, the Dissent’s reliance on City of Philadelphia v. Schweiker, 858 A.2d 75 (Pa. 2004),
is severely misplaced. In that case, the General Assembly enacted a statute that granted the City of
Philadelphia (city) the authority to create and control a parking authority, including through the
appointment of members to serve on the authority, and the power to collect and distribute the revenue
collected from the authority. However, the General Assembly explicitly declared that the parking
authority was an instrumentality of the Commonwealth—not the city—and subsequently passed
legislation that unquestionably transferred control of the parking authority and appointment powers
of its members to the Governor of Pennsylvania and, further, clearly dictated how the city must
allocate revenue generated by the authority. The only issue on appeal in Schweiker that is tangentially
relevant here was whether the General Assembly possessed the legislative authority to take away that
which it had given to the city, a political subdivision of the Commonwealth. Of course, it does. Here,
by contrast, the issue is whether the General Assembly actually exercised such authority when it
enacted section 5610(a.1) of the MAA. Respectfully, the Dissent does not substantiate its position
with any sound textual statutory analysis or explanation how or why the General Assembly abrogated
another statutory section that it enacted, i.e., section 5622(a), and the longstanding case law from this
Court interpreting that section.
21
1954) (“Statutes should be construed in harmony with the existing law; repeal by
implication is carefully avoided by the courts.”). Therefore, contrary to the conclusion
reached by the trial court, we conclude that section 5610(a.1) did not disrupt the
continuity of our case law. Instead, we hold that section 5622(a) of the MAA continues
to vest a municipality, such as the City in this case, with the power to acquire and
dispose of the assets of an authority and an authority itself, such as the Authority in this
case, without the advice or consent of the authority or, here, the Authority.
Neither the trial court, nor the Authority, nor the County of Chester, as
appellees, have submitted any persuasive argument that could sustain an opposite
conclusion. Indeed, the trial court’s opinion does not contain any foundational
premises or deductive reasoning that accounts for why or how it arrived at its
interpretation of section 5610(a.1). For their part, the Authority and the County of
Chester cite County of Allegheny v. Moon Township Municipal Authority, 671 A.2d
662 (Pa. 1996), and Burke v. North Huntingdon Township Municipal Authority, 136
A.2d 310 (Pa. 1957), as standing for the proposition that former section 18(A) of the
1945 MAA and, by extension, section 5622(a) of the current MAA, provide the
Authority with the authority to transfer the Authority’s property on its own accord.
However, in Clearfield Borough, this Court already dismissed the
contention that Burke provided pinpoint authority on the issue, stating that, upon “[a]
careful reading,” Burke did not “clearly rule[] on the specific issue[]” of whether
[former] section 18(A) conferred upon an authority the sole power to dispose of its
assets and, thus, did not “control[] our ruling in [that] case.” Clearfield Borough, 285
A.2d at 534. We agree with our observation in Clearfield Borough and reaffirm it. In
Burke, an engineer contracted with a water authority to perform engineering services
in connection with a project and, having not been paid for his services, filed a contract
22
action against the township. Meanwhile, via a written agreement signed by both the
township and the water authority, the water works of the water authority were sold to
a county authority. On these facts, our Supreme Court concluded that the engineer’s
contract claim against the township was not cognizable because the township never
obtained the “project” and “debts” of its water authority under former section 18(A) of
the 1945 MAA. More specifically, the Court held: “[t]he [t]ownship’s execution of
the agreement between the [water] [a]uthority and the [c]ounty [a]uthority was simply
a waiver by the municipality of its rights to acquire the project from the [water]
[a]uthority and there was no statutory assumption by the municipality of any of the
obligations incurred by the [water] [a]uthority in respect to its project.” Burke, 136
A.2d at 314 (emphasis added).
With this holding in Burke, our Supreme Court explicitly recognized that
a township possesses the authority to acquire an authority’s assets pursuant to former
section 18(A) of the 1945 MAA. Consequently, any statements in Burke suggesting
that an authority can dispose of its own assets by enacting a resolution or ordinance,
via former section 18(A) of the 1945 MAA, not only contradicted or undermined its
core holding, but also constituted dicta, because such statements were not essential to
the ruling of that case. See Valley Township v. City of Coatesville, 894 A.2d 885, 889
(Pa. Cmwlth. 2006) (stating that dicta is “an opinion by a court on a question that is
directly involved, briefed, and argued by counsel, and even passed on by the court, but
that is not essential to the decision. Dicta has no precedential value.”). In any event,
the water authority in Burke did not pass a resolution or ordinance transferring its assets
and, as such, the question of whether an authority could have done so under former
section 18(A) of the 1945 MAA was not at issue in Burke. Therefore, unlike our case
law described and discussed above, Burke cannot be deemed to have squarely decided
23
the question of whether an authority, in the face of a legislative demand by a
municipality for the authority to convey its assets to the municipality, can disregard the
municipality’s demand and solely transfer and/or sell its assets per the power
exclusively granted to it under former section 18(A) of the 1945 MAA.
Similarly, County of Allegheny did not decide the issue presently before
this Court. In that case, a township authority entered into a contract to convey its
pollution control system to a county and the issue was whether the authority had the
power to convey its property to another governmental entity under the 1945 MAA. Our
Supreme Court concluded that the plain language of former section 4B(d) of the 1945
MAA, which stated that an authority is “empowered . . . to sell, lease as lessor, transfer
and dispose of any property or interest therein at any time acquired by it,” formerly 53
P.S. §306B(d), permitted the authority to do so. Former section 4B(d) of the 1945
MAA is now located in current section 5607(d)(4) and, as mentioned above, likewise
provides an authority with the power “to sell, lease as lessor, transfer and dispose of
any property or interest therein at any time acquired by it.” 53 Pa.C.S. §5607(d)(4).
See supra note 9. Nonetheless, just because an authority may transfer its assets to other
governmental entities, as part of its daily operational affairs under other sections of the
1945 MAA and the current MAA, this does not mean that an authority possesses the
same and sole power under section 5622(a) of the MAA. Indeed, as a juxtaposition,
the Supreme Court in County of Allegheny clarified that, in contrast to former section
4B(d) of the 1945 MAA, former section 18(A) of the 1945 MAA was “applicable only
to instances in which an authority’s project is being transferred to the municipality or
municipalities that actually created the authority.” County of Allegheny, 671 A.2d at
665 (emphasis added). The Supreme Court further added that former section 18(A)
was “presumably enacted to preclude a municipality . . . from assuming responsibility
24
over projects absent a resolution or ordinance indicating the municipality’s clear
willingness to do so.” Id. (emphasis added). Therefore, while County of Allegheny
confirmed that an authority may transfer or convey its assets to another governmental
entity in the daily course of its business, it also reaffirmed that, assuming an authority
does not want to transfer its assets to another authority or governmental entity, the
creating and/or incorporating municipality, proceeding under former section 18(A) of
the MAA or section 5622(a) of the MAA, can obtain the authority and its assets by
passing an ordinance stating the municipality’s desire to do so.
At bottom, both Burke and County of Allegheny involved issues arising
out of the situation where an authority transferred assets to another governmental
entity. However, neither Burke nor County of Allegheny concerned the issue of whether
a township or other municipality, pursuant to former section 18(A) of the 1945 MAA
or section 5622(a) of the MAA, can obtain an authority and all of its assets, especially
where, as here, the municipality created and/or incorporated the authority, and the
authority does not wish to relinquish title or control over its assets or projects.
Ultimately, the difference in the factual backgrounds presented in Burke and County of
Allegheny from that of this case is extremely significant, rendering Burke and County
of Allegheny inapposite legal authority. Due to the factual disparity between Burke and
County of Allegheny and this case, we conclude that, on consideration, our decisions in
Clearfield Borough, Forward Township Sanitary Sewage Authority, Township of
Forks, and Salem Township Municipal Authority are on all fours with the factual
posture of the legal issue before this Court and, thus, constitute controlling and
authoritative case law in the interpretation of former section 18(A) of the 1945 MAA
and current section 5622(a) of the MAA. For this reason, and those stated above, we
25
believe that the reliance placed on Burke and County of Allegheny by the Authority and
the County of Chester is misplaced and unwarranted.
The Authority and the County of Chester also make an array of arguments
that fall outside the scope of the issue that this Court has accepted for review. For
example, the Authority asserts, inter alia, that the City cannot satisfy “mandatory
preconditions” to exercising its power under section 5622(a), namely that the “project”
be one that was “established under [the MAA] by a board appointed by a municipality”
and is “of a character which the municipality has the power to establish, maintain[,] or
operate.” (County of Chester’s Br. at 18 (quoting 53 Pa.C.S. §5622(a)).) The Authority
further contends that the City never “contributed to the cost of the improvement” and,
thus, cannot wield its authority pursuant to section 5622(a). Id. at 26 (citing Gemmill
v. Calder, 3 A.2d 7 (Pa. 1938)). The Authority also states that “the City does not own
and has never possessed the Authority,” id. at 27, and claims that the City’s dire
financial status does not provide it with a right to obtain the Authority and its assets.
On the other hand, the County of Chester argues that, regardless of section 5622(a) of
the MAA, section 5607(d)(4) of the MAA provides the Authority with the express
authority to place its assets into a trust.
We decline, however, to address any of these legal arguments. When this
Court granted the petitions for permission to appeal filed by the City and Aqua, we
accepted one issue, and only one issue, for review: whether section 5610(a.1) of
the MAA mandates that the City, the County of Chester, and the County of
Delaware, as the “governing body” of the Authority, approve a transfer of the
Authority’s assets to the City, or whether the City, pursuant to section 5622(a) of
the MAA, can obtain the Authority and its assets without the approval of the
Authority or its “governing body.” In resolving these appeals, we merely conclude
26
that, despite section 5610(a.1) of the MAA, the City possesses the sole power under
section 5622(a) of the MAA to demand and compel the conveyance of the Authority
and its assets by enacting the appropriate resolution and/or ordinance. Contrary to what
the Dissent says, our decision is limited to determining whether the City possesses the
general authority under section 5622(a) to obtain the assets of the Authority. We never
decide, and do not reach, the separate issue of whether the City can satisfy all of the
conditions within section 5622(a) and obtain all of the assets of the Authority.
Moreover, this Court voices no opinion as to what particular assets the City may or
may not obtain, much less resolve the contractual conditions, i.e., the debt and/or
financing obligations, that the City must assume before it could even take possession
of those assets. See 53 Pa.C.S. §5622(a) (stating that a municipality can only obtain
the assets of an authority’s specific project “upon the assumption by the municipality
of all the obligations incurred by the authorit[y] with respect to that project”).11 These
are issues to be resolved on remand and require further factual development.
Further, the Dissent places much emphasize on the receivership
proceedings and the 2021 Revised Recovery Plan as discussed in Davin II, which
simply reflects that the City, as an economically distressed municipality experiencing
a fiscal emergency under Act 47, desires to sell the Authority’s assets if it can obtain
them. See generally supra note 6. Apparently, the Dissent does so in an attempt to
make an equitable plea for what it believes is just and fair. However, in no way does
the 2021 Revised Recovery Plan, as confirmed by this Court in Davin II, have any
11
Despite the Dissent’s assertion that this is all a “foregone conclusion,” __ A.3d at __, slip
op. at 10 (Wojcik, J., dissenting), there is naturally a dramatic difference in rendering a legal
conclusion that the City, in general, possesses the statutory power to obtain the Authority and/or its
assets, as opposed to making a conclusion regarding the manner or extent to which the City may
lawfully exercise that power (by way of analogy, the government obviously has the power to conduct
searches and seizures; the precise and particular way that it may do so is another story). While this
Court decides the former, it does not the latter.
27
bearing or relevance to this case. Indeed, in that plan, the Receiver explained that “the
City is currently before the Commonwealth Court defending its ability to repossess and
sell the assets of the [Authority]” and “direct[ed] the City to continue litigating for its
ability to repossess and sell the assets of the [Authority].” Davin II, slip op. at 7 and
Order; 2021 Revised Recovery Plan at 85, 87 (emphasis added). As explained above,
the litigation in this case is far from over, and, until all the pertinent legal issues
surrounding the City’s authority under section 5622(a)—and possibly other statutes—
are resolved, the City’s plans and future expectations with respect to the Authority’s
assets are nothing more than a surmised contingency.
Having decided the only issue that we have taken up for review, we
remand the cases to the trial court without prejudice to the Authority and the County
of Chester to raise the arguments that we have declined to address. We express no
view as to what effect, if any, our resolution of the legal issue we accepted for review
will have on the trial court’s reconsideration of the parties’ motions for judgment on
the pleadings.
As a final housekeeping matter, we dispose of two supplemental filings of
the parties. First, on November 19, 2020, the City filed a letter, titled a “Status Report
Update,” that responded to an inquiry in this Court’s per curiam order and provided
information relative to the impact, if any, that the City’s receivership would have on a
sale of the Authority’s assets. The Authority has opposed this submission and
essentially seeks to strike it because the City did not obtain leave of court and the report
should not be considered because the underlying proceedings involved judgment on
the pleadings. The Court grants the City’s implicit request to take cognizance of its
submission and accepts the Status Report Update. However, we note that it did not
play a role in our decision. Second, on November 19, 2020, the City filed an
28
application under Pa.R.A.P. 2501(a), requesting that this Court take notice of the
Supreme Court’s recent decision in In re Canvassing Observation, 241 A.3d 339 (Pa
2020). The Court grants the City’s application and accepts In re Canvassing
Observation as potential legal authority in these matters, but, having considered that
case, we conclude that it is inapplicable.
Accordingly, and for the above-stated reasons, we reverse the trial court’s
April 24, 2020 orders denying the motion for judgment on the pleadings filed by the
City and Aqua and remand the cases to the trial court for further proceedings consistent
with this opinion. We grant the City’s request to accept its Status Report Update and,
also, its application filed under Pa.R.A.P. 2501(a).
________________________________
PATRICIA A. McCULLOUGH, Judge
Judges Fizzano Cannon and Crompton did not participate in this decision.
29
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
In Re: Chester Water Authority Trust :
:
: No. 489 C.D. 2020
Appeal of: City of Chester :
In Re: Petition for Approval of :
Declaration of Trust Under :
Pennsylvania Law and the Transfer :
of Legal Title to Certain Assets to :
the Trust : No. 504 C.D. 2020
:
Appeal of: Aqua Pennsylvania, Inc. :
:
City of Chester, :
Appellant :
: No. 514 C.D. 2020
v. :
:
Chester Water Authority :
In Re: Petition for Approval of :
Declaration of Trust Under :
Pennsylvania Law and the Transfer :
of Legal Title to Certain Assets to : No. 685 C.D. 2020
the Trust :
:
Appeal of: Aqua Pennsylvania, Inc. :
ORDER
AND NOW, this 16th day of September, 2021, the April 24, 2020 orders
of the Court of Common Pleas of Delaware County (trial court) are hereby
REVERSED, and the cases are REMANDED to the trial court for further
proceedings consistent with this opinion. The November 19, 2020 “Status Report
Update,” filed by the City of Chester (City), is treated as an application to accept the
submission for consideration in this case, and such application is GRANTED. The
City’s application filed on November 19, 2020, and pursuant to Pa.R.A.P. 2501(a)
is also GRANTED.
Jurisdiction relinquished.
________________________________
PATRICIA A. McCULLOUGH, Judge
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
In Re: Chester Water Authority Trust :
: No. 489 C.D. 2020
Appeal of: City of Chester :
In Re: Petition for Approval of :
Declaration of Trust Under :
Pennsylvania Law and the Transfer : No. 504 C.D. 2020
of Legal Title to Certain Assets to the :
Trust :
:
Appeal of: Aqua Pennsylvania, Inc. :
City of Chester, :
:
Appellant :
:
v. : No. 514 C.D. 2020
:
Chester Water Authority :
In Re: Petition for Approval of :
Declaration of Trust Under :
Pennsylvania Law and the Transfer :
of Legal Title to Certain Assets to the : No. 685 C.D. 2020
Trust : Argued: November 10, 2020
:
Appeal of: Aqua Pennsylvania, Inc. :
BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge
HONORABLE RENÉE COHN JUBELIRER, Judge
HONORABLE P. KEVIN BROBSON, Judge
HONORABLE PATRICIA A. McCULLOUGH, Judge
HONORABLE ANNE E. COVEY, Judge
HONORABLE MICHAEL H. WOJCIK, Judge
HONORABLE ELLEN CEISLER, Judge
DISSENTING OPINION
BY JUDGE WOJCIK FILED: September 16, 2021
I respectfully dissent. Although I agree with the Majority’s recitation
of the tenets of statutory construction and the continuity of our case law, I do not
agree with the interpretation of the statutory provisions at issue. The Majority’s
mischaracterization of the Dissent’s position demonstrates the error in its analysis.
Section 5610(a.1) of the Municipality Authorities Act (MAA) provides:
Water authorities and sewer authorities.--If a water or
sewer authority incorporated by one municipality provides
water or sewer services to residents in at least two counties
and has water or sewer projects in more than two counties
where the combined population of the served
municipalities, excluding the incorporating municipality,
is at least five times the population of the incorporating
municipality, all of the following apply:
(1) Ninety days after the effective date of this
subsection, the governing body in existence on the
effective date of this subsection shall be replaced by a
governing body comprised of the following:
(i) Three members appointed by the
governing body from each county in which the services to
residents are provided. A member under this
subparagraph must reside in a town, township or borough,
which receives services from the authority.
(ii) Three members appointed by the
governing body of the incorporating municipality.
53 Pa. C.S. §5610(a.1).
Section 5622(a) of the MAA provides:
If a project established under this chapter by a board
appointed by a municipality is of a character which the
municipality has power to establish, maintain or operate
and the municipality desires to acquire the project, it may
by appropriate resolution or ordinance adopted by the
proper authorities signify its desire to do so, and the
MHW-2
authorities shall convey by appropriate instrument the
project to the municipality upon the assumption by the
municipality of all the obligations incurred by the
authorities with respect to that project.
53 Pa. C.S. §5622(a) (emphasis added). Generally, the term “project” refers to the
kind and character of projects permitted including “[w]aterworks, water supply
works, water distribution systems.” Section 5607(a)(10) of the MAA,
53 Pa. C.S. §5607(a)(10). As used within Section 5610 of the MAA, “[w]ater or
sewer project” specifically refers to “[a]ny pumping station, filtering plant,
impoundment facility, dam, spillway or reservoir.” 53 Pa. C.S. §5610(g). The term
“[b]oard” refers to the “governing body of an authority.” Section 5602 of the MAA,
53 Pa. C.S. §5602. For purposes of Section 5610 of the MAA, a “[w]ater or sewer
authority” is “[a]n authority incorporated by a city of the third class, a borough, a
town or a township to provide water or sewer services.” 53 Pa. C.S. §5610(g).
What we are dealing with here is a water project established under the
MAA by the Chester Water Authority (Authority). The Authority was incorporated
by the City of Chester (City), a city of the third class, in 1939. Reproduced Record
(R.R.) at 1551a-53a. At inception, the Authority provided water services almost
exclusively to the residents of the City, with systems and infrastructure located
within the City. R.R. at 25a. With post-war suburban growth, the service area
expanded into Chester County and Delaware County (Counties). Id. To
accommodate the growing service area’s needs, the Authority acquired existing
systems and constructed significant infrastructure outside of the City in the Counties.
Id. These improvements included “a small pumping station and the pertinent water
rights, in Pine Grove, on the Octoraro Creek, Chester County . . . forty miles distant
from the City”; and “a dam, spill way, and a two[-]billion[-]gallon reservoir on the
MHW-3
Octoraro Creek, a filtering plant and pumping station at Pine Grove and a large
transmission main to carry the water to Chester.” Rankin v. Chester Municipal
Authority, 68 A.2d 458, 462 (Pa. Super. 1949). The acquisition and construction of
property and infrastructure was financed by the Authority through the issuance of
water revenue bonds and water rates paid by the Authority’s ratepayers, not by City
funding. Id. Today, the Authority serves approximately 200,000 ratepayers across
37 municipalities throughout Chester and Delaware Counties and beyond. Only
21% of its ratepayers are located within the City itself. R.R. at 25a.
For years, the City, as the incorporating municipality, solely appointed
the Authority’s governing body. However, that changed when the General
Assembly added Section 5610(a.1) of the MAA – a special provision that appears to
be applicable only to the Authority at the present time. Because the Authority
“provides water or sewer services to residents in at least two counties and has water
or sewer projects in more than two counties where the combined population of the
served municipalities, excluding the incorporating municipality, is at least five times
the population of the incorporating municipality,” the General Assembly altered the
composition of the Authority’s governing body to give equal representation to the
municipalities serviced by the Authority. 53 Pa. C.S. §5610(a.1) (emphasis added).
As a result, the Authority went from a five-member governing body appointed solely
by the City to a nine-member governing body appointed equally by the City, Chester
County, and Delaware County.
This alteration is significant. When Section 5622(a) and Section
5610(a.1) are read together, as they must be, and applied to the situation here, the
Authority’s board is no longer “a board appointed by a municipality” for purposes
of Section 5622(a) of the MAA. See Pennsylvania Gaming Control Board v. Office
MHW-4
of Open Records, 103 A.3d 1276, 1285 (Pa. 2014) (holding “statutory language must
be read in context, that is, in ascertaining legislative intent, every portion of statutory
language is to be read together and in conjunction with the remaining statutory
language, and construed with reference to the entire statute as a whole”). Rather, it
is a board appointed by three municipalities. Consequently, under Section 5622(a),
“the proper authorities” to adopt a resolution or ordinance to convey the project are
the City, Chester County, and Delaware County. By altering the membership of the
Authority’s board, the General Assembly has impaired the City’s ability to
unilaterally make decisions for the Authority and acquire the project without the
approval of the other two municipalities represented by the Authority.
The situation is akin to that of a joint authority. “Whenever the
municipal authorities of any municipality singly or of two or more municipalities
jointly desire to organize an authority under this chapter, they shall adopt a resolution
or ordinance signifying their intention to do so.” Section 5603(a) of the MAA,
53 Pa. C.S. §5603(a). In addition, Section 5604(b) of the MAA, 53 Pa. C.S.
§5604(b), empowers non-incorporating municipalities to join in the original
incorporation. “When an authority has been incorporated by one or more
municipalities, a municipality not having joined in the original incorporation may
subsequently join in the authority.” Section 5604(b) of the MAA, 53 Pa. C.S.
§5604(b). A municipality wishing to become a member of an existing authority
must signify its desire by resolution or ordinance, filing an application, and
certification. Section 5604(c)-(e) of the MAA, 53 Pa. C.S. §5604(c)-(e). “If the
authority is incorporated by two or more municipalities, the board shall consist of a
number of members at least equal to the number of municipalities incorporating the
authority, but in no event less than five.” Section 5610(a)(2) of the MAA, 53
MHW-5
Pa. C.S. §5610(a)(2) (emphasis added). In addition, “[w]hen one or more additional
municipalities join an existing authority, each of the joining municipalities shall
have similar membership on the board as the municipalities then members of the
authority and the joining municipalities may determine by appropriate resolutions.”
Id. (emphasis added). If an authority was incorporated by two or more municipalities
at its inception, or later joined by a municipality not having joined in the original
incorporation, a minority municipality would not have the power to unilaterally
acquire the project. See Section 5622(a) of the MAA, 53 Pa. C.S. §5622(a).
The same logic applies here. Although neither Chester County nor
Delaware County incorporated the Authority or later joined in the original
incorporation, Section 5610(a.1) of the MAA has elevated the Counties to “joining
municipalities” for all practical intents and purposes. The General Assembly
“replaced” the existing board appointed by the City with a new board appointed by
the City and both Counties. 53 Pa. C.S. §5610(a.1). By assigning the Counties
“membership on the board” equal to the City’s membership, the General Assembly
did by legislative fiat what the municipalities could have done themselves by jointly
incorporating at the Authority’s inception or later adopting a resolution or ordinance
signifying their intention to jointly organize. See Section 5603(a) of the MAA,
53 Pa. C.S. §5603(a); Section 5610(a)(2) of the MAA, 53 Pa. C.S. §5610(a)(2); see
also City of Philadelphia v. Schweiker, 858 A.2d 75 (Pa. 2004).
This is not the first time that the General Assembly has transferred
control of an authority by legislation by altering the composition of the governing
body. In Schweiker, the General Assembly took similar action by taking over control
of the Philadelphia Parking Authority (Parking Authority). The Parking Authority
was created by ordinance by the City of Philadelphia in 1950. Under former Section
MHW-6
8 of the Parking Authority Law,1 the Parking Authority was controlled by a five-
member governing board appointed by the Mayor of Philadelphia (Mayor). Pursuant
to this control, the Parking Authority paid the City of Philadelphia revenues derived
from parking facilities and on-street parking services, which amounted to
approximately $34,500,000 per year. These monies formed part of the City of
Philadelphia’s annual operating budget. Schweiker, 858 A.2d at 79.
In 2001, the General Assembly enacted Act 22 of 2001 (Act 22),2 which
codified and “amended the Parking Authority Law by adding a special provision –
applicable only to Philadelphia – supplanting the Mayor’s appointment powers over
the Parking Authority’s governing board and repositing appointment authority in the
Governor.” Schweiker, 858 A.2d at 80. Act 22 also ordered the transfer of up to
$45,000,000 of its retained earnings to the Philadelphia School District. Id. Even
though the Parking Authority was established by the City of Philadelphia, the
General Assembly legally transferred control of the Parking Authority from the City
of Philadelphia to the Commonwealth. Id.
Similarly, here, by enacting Section 5610(a.1), the General Assembly
has transferred some of the City’s control over the Authority and the project by
taking away the City’s exclusive appointment power and repositing that power in
the City, Chester County and Delaware County in equal measure.3
1
Act of June 5, 1947, P.L. 458, as amended, formerly 53 P.S. §348, repealed by the Act of
June 19, 2001, P.L. 287. See new 53 Pa. C.S. §5508.
2
Act of June 19, 2001, P.L. 287, No. 22.
3
The Majority’s attack on our citation to Schweiker again demonstrates its inability to
comprehend the import of the General Assembly’s enactment of Section 5610(a.1). It is beyond
question that Act 22 and Section 5610(a.1) were enacted to apply to distinct entities serving
differing purposes. Our citation to Schweiker is merely to demonstrate, as the Majority readily
(Footnote continued on next page…)
MHW-7
Contrary to the Majority’s supposition, this interpretation does not
suggest that “a municipality can create an autonomous political subdivision that
possesses more power than the municipality itself,” “overrule 30-plus years of case
law construing [S]ection 5622(a),” or “effectively rewrit[e] the MAA.” In Re
Chester Water Authority, __ A.3d __, __ (Pa. Cmwlth., Nos. 489, 504, 514, and 685
C.D. 2020, filed September 16, 2021), slip op. at 20 n.10. Nor does this
interpretation render an inharmonious result within the statute itself or interfere with
our longstanding precedent that a single municipality that exclusively appoints an
authority’s board has the power to unilaterally direct the transfer of authority
property. See Township of Forks v. Forks Township Municipal Sewer Authority, 759
A.2d 47 (Pa. Cmwlth. 2000); Forward Township Sanitary Sewage Authority v.
Township of Forward, 654 A.2d 170 (Pa. Cmwlth. 1995); Clearfield Borough v.
Clearfield Borough Park Authority, 285 A.2d 532 (Pa. Cmwlth. 1971), aff’d, 301
A.2d 372 (Pa. 1973) (per curiam). Rather, this interpretation simply gives meaning
concedes, that the General Assembly had the authority, and chose to exercise it via Section
5610(a.1)’s enactment, to wrest away complete control from the City over the Authority.
Moreover, and contrary to the Majority’s hyperbolic assertion, Section 5610(a.1) did not abrogate
Section 5622(a) or longstanding case law interpreting the same. Rather, as outlined extensively
throughout our Dissent, Section 5610(a.1) merely altered the City’s ability to meet the statutory
criteria to unilaterally acquire the project under Section 5622(a) by changing the composition of
the board and granting the Counties equal membership on the board with equal authority to control
the Authority and its assets. By way of hypothetical, suppose that the General Assembly amended
the definition of “municipality” under Section 5602 of the MAA, 53 Pa. C.S. §5602, which is
defined as “[a] county, city, town, borough, township or school district of the Commonwealth,”
by excluding “cities” from the definition. Such an amendment would similarly impede the City’s
ability to acquire the project under Section 5622(a) because it would no longer meet the statutory
criteria for doing so. In that situation, it would be completely unnecessary for the General
Assembly to amend Section 5622(a) in order to effectuate the desired result because the
amendment would be self-operating. The same holds true here. The General Assembly, by
changing the composition of the board and granting the Counties equal membership on the board
with equal authority to control the Authority under Section 5610(a.1), altered the City’s ability to
meet the statutory criteria to unilaterally acquire the project under Section 5622(a) of the MAA.
MHW-8
to the General Assembly’s amendment by limiting “a municipality’s” ability to
“acquire a project” when that municipality no longer meets the statutory criteria for
doing so. By giving the Counties appointment power and representation on the
Authority’s board, the General Assembly has given the City and Counties, not the
Authority itself, equal power in determining what happens to the project as if they
were part of a joint authority.
The Majority opines that “[i]n enacting [S]ection 5610(a.1), our
General Assembly simply provided the [Counties] with ‘seats at the table’ of the
governing body or board of the Authority.” In Re Chester Water Authority, __ A.3d
at __, slip op. at 20 n.10. Yet, the Majority ascribes little to no significance to the
Counties’ representation. As the Majority recognizes: “The cardinal rule of all
statutory interpretation is to ascertain and effectuate the intent of the General
Assembly.” O’Rourke v. Department of Corrections, 778 A.2d 1194, 1201 (Pa.
2001). In my view, the General Assembly did not amend the MAA to simply give
counties meeting the specific criteria token “seats at the table” to ensure uniform
rates and service and manage the Authority’s day-to-day affairs.4 Rather, the
General Assembly recognized Chester and Delaware Counties as critical
stakeholders in this water project and as representatives for their constituent
ratepayers who, in this unique situation, outnumber the City’s ratepayers by “at least
five times.” 53 Pa. C.S. §5610(a.1). The growth and success of the water project
has been built on the backs of the Counties’ ratepayers. Therefore, the General
4
Such a narrow interpretation of Section 5610(a.1) is superfluous to protections found
elsewhere in the MAA. Section 5607(d)(9) already requires the authority to fix “reasonable and
uniform” rates and to provide “safe and reasonable service . . . in the areas served,” regardless of
board composition. 53 Pa. C.S. §5607(d)(9) (emphasis added). “Any person questioning the
reasonableness or uniformity of a rate fixed by an authority or the adequacy, safety and
reasonableness of the authority’s services, including extensions thereof, may bring suit against the
authority . . . .” Id.
MHW-9
Assembly gave the Counties “seats at the table” of the governing board to give them
some meaningful control over the Authority, its assets, and “the project” that
provides them with vital water service in their areas.
The Majority’s upside-down logic has the tail wagging the dog. Under
the Majority’s statutory interpretation, the City would constitute a super-minority of
the Authority’s board, with the ability to unilaterally “acquire the project” and sell
the Authority’s assets to pay the City’s debt, leaving the 79% majority of the
Authority’s ratepayers living in the Counties and elsewhere, where the majority of
the assets are actually located, holding the bag. The General Assembly could not
have intended such an intolerable and absurd result. See Section 1922(1) of the
Statutory Construction Act of 1972, 1 Pa. C.S. §1922(1) (“In ascertaining the
intention of the General Assembly in the enactment of a statute the following
presumptions, among others, may be used: . . . That the General Assembly does not
intend a result that is absurd, impossible of execution or unreasonable.”).
Finally, the resolution of whether the City possesses the general
authority under Section 5622(a) of the MAA to acquire the project and obtain the
assets of the Authority is the critical inquiry before this Court and the ultimate
precondition for the sale of those assets. Once that determination is reached, the
City’s ability to dissolve the Authority and sell the assets is a foregone conclusion.
The adoption of an appropriate resolution or ordinance and assumption of
obligations are mere formalities. See 53 Pa. C.S. §5622(a). In fact, the City is
already in the process of selling off the Authority’s assets to remedy its financial
distress. The Majority simply chooses to ignore objective reality in this regard.
By a June 8, 2021 Memorandum and Order, this Court confirmed the
Revised Recovery Plan (2021 Plan) that was filed in this Court on April 7, 2021, by
MHW-10
the Receiver appointed for the City pursuant to the Municipalities Financial
Recovery Act (Act 47).5, 6 See Davin v. City of Chester (Pa. Cmwlth., No. 336 M.D.
2020, filed June 8, 2021). In relevant part, the 2021 Plan states:
The City is currently before the Commonwealth Court
defending its ability to repossess and sell the assets of the
[Authority], which could provide it with a significant
infusion of needed funds. An en banc panel of the
Commonwealth Court heard oral argument on the matter
on November 10, 2020. At the time of the filing of this
[2021] Plan, the Commonwealth Court had not issued its
opinion.
The City issued a request for proposals (RFP) for the
purchase of the Water System and received three
proposals from Aqua America, Pennsylvania American
Water and the [Authority] itself. According to the initial
bids, the City could potentially receive between $60
million and $410 million if it sells the system. Pursuant to
the pending litigation, although the City was permitted to
proceed with the RFP process, the City is currently
enjoined from completing any transaction involving the
disposition of the system.
The Receiver asked PFM Financial Advisors (“PFM”), a
member of the Receiver’s team, to conduct its own
independent analysis and due diligence of the proposals
that the City received to purchase [Authority] assets. PFM
compared the purchase prices and the rate/average bill
projections of each proposal and provided what it expected
to be the [Authority]’s up-front fair market value. This
analysis was provided to the Court in the Receiver’s
December 2, 2020 update. Based on commonly utilized
valuation methods, PFM expected that [the Authority’s]
5
Act of July 10, 1987, P.L. 246, as amended, 53 P.S. §§11701.101-11701.712.
6
It is appropriate for us to take judicial notice of our own official court records. See, e.g.,
Pa. R.E. 201(b)(2); Germantown Cab Company v. Philadelphia Parking Authority, 27 A.3d 280,
283 n.8 (Pa. Cmwlth. 2011); Doxsey v. Commonwealth, 674 A.2d 1173, 1174 (Pa. Cmwlth. 2004).
MHW-11
up-front fair market value to be in the range of $385
million to $400 million
***
The Receiver hereby directs the City to continue litigating
for its ability to repossess and sell the assets of the
[Authority]. Furthermore, subject to the next paragraph,
the Receiver authorizes the City to continue with the RFP
process (in compliance with any court order).
The City will consult with the Receiver regarding all
material steps to be taken by the City with respect to the
Water System. The City must obtain the prior written
consent of the Receiver prior to accepting a proposal under
the RFP process and/or prior to consummating any
transaction regarding the water system. The City must
obtain the prior written consent of the Receiver prior to
accepting any proposal related to the resolution of the
outstanding litigation regarding the water system.
***
The City shall consult with the Receiver regarding all
material steps to be taken by the City with respect to any
City assets. The City must obtain the prior written consent
of the Receiver prior to spending any revenues generated
from the monetization of City assets. If the City is able to
generate revenue from the sale of any City assets, it must
first determine what debt obligations must be defeased in
accordance with applicable covenants and specifically
obligations related to the Series 2017A Bonds.
There are several potential uses for asset monetization
proceeds if the City reaches that point in the process. The
City shall use these one-time revenues to fund non-
recurring expenditures and address the City’s structural
problems, and shall not use the proceeds to fund ongoing
operating expenditures. At the direction of the Receiver,
the City shall then direct any proceeds, including any
advances, generated from any asset monetization to the
following immediate priorities . . . .
2021 Plan at 85, 87 (footnotes omitted).
MHW-12
Thus, contrary to the Majority’s assertion that the Authority’s assets
may hypothetically come up for sale by the City based on our holding in this case,
the City has already started the RFP process to “monetize” the Authority’s assets,
and there is already a Court-approved plan in place for the use of the proceeds of the
City’s sale of those assets. It is patently unconscionable to permit the City to pay
off its own municipal debt by selling the Authority’s assets that were paid for by its
ratepayers, the vast majority of whom reside in the Counties and elsewhere. In fact,
the General Assembly granted the Counties “seats at the table” to prevent the City
from looting the Authority, and using the sale of the Authority’s assets as its own
municipal piggy bank, by enacting Section 5610(a.1).
Accordingly, unlike the Majority, I would affirm the trial court’s order.
MICHAEL H. WOJCIK, Judge
Judge Cohn Jubelirer joins in this dissent.
MHW-13