Land & Renewables Connection

Part 3: The Pennsylvania Supreme Court Weighs In

If you own property in Pennsylvania and pay a stormwater management “fee” to your municipality or municipal authority, you may be paying a tax that was never properly authorized. Pennsylvania municipalities and municipal authorities have spent years collecting these charges. The Pennsylvania Supreme Court’s April 2026 decision in Borough of West Chester v. Pennsylvania State System of Higher Education now forces an uncomfortable question they have to answer: were those “fees” actually taxes? For many municipalities, the honest answer is yes — a political problem, but a manageable one. For municipal authorities specifically, that answer is not just uncomfortable. It may mean they had no legal authority to collect those charges at all.

Introduction

In Part 1 of this series, “Are Pennsylvania Stormwater “Fees” Really Fees?” we examined the background of Pennsylvania’s stormwater regulatory framework and the fee-versus-tax question it raises. In Part 2, “A Charge to Everyone,” we examined how Pennsylvania’s Second Class Township Code structures stormwater fee authority, and whether a township-wide assessment on all properties could legitimately qualify as a fee rather than a tax — a question the Commonwealth Court’s decision in Borough of West Chester had left unresolved while the case was on appeal to the Pennsylvania Supreme Court. That appeal has now been decided, and the result simultaneously creates clarity and a host of open questions.

On April 30, 2026, the Pennsylvania Supreme Court issued its decision in Borough of West Chester v. Pennsylvania State System of Higher Education, ___ A.3d ___ (Pa. 2026), affirming what the Commonwealth Court concluded three years earlier: West Chester’s stormwater charge was a tax, not a fee, regardless of what the Borough called it. The Supreme Court’s decision did not break new legal ground — and that is what is important and concerning. The Court applied longstanding legal principles differentiating fees from taxes — principles that appear to have been quietly set aside as municipalities and authorities found it more convenient, and more politically palatable, to call stormwater charges something other than what they are.

The implications extend well beyond one borough. But they likely fall hardest on municipal authorities that assess fees for stormwater management. The reason is straightforward and difficult to work around: authorities cannot tax. If these authorities are assessing “fees” for stormwater that are actually “taxes,” they have no legal authority to do that.

Background

The essential facts of Borough of West Chester warrant brief repetition. West Chester adopted a “Stream Protection Fee” in 2016 and assessed it against all developed properties within the Borough — generally, all properties with impervious area determined to benefit from the stormwater system, with the fee based on the amount of impervious surface coverage.

The Borough assessed its stormwater fee against West Chester University, a part of the Pennsylvania State System of Higher Education, which refused to pay, arguing that the charge was a tax that the municipality had no authority to assess against Commonwealth property. The University filed suit in the Commonwealth Court seeking a determination that the stormwater “fee” was actually a tax. The University prevailed before the Commonwealth Court and prevailed again at the Pennsylvania Supreme Court. West Chester’s stormwater “fee” is a tax.

The Pennsylvania Supreme Court Weighs In

The Pennsylvania Supreme Court’s review was straightforward — it applied longstanding precedent to a basic factual situation. To decide whether a governmental assessment is a “tax” or a “fee,” a two-step approach is utilized.

The first question is whether the municipality is acting in a “public” or “quasiprivate” capacity when it provides the service associated with the challenged assessment. This distinction turns on two related inquiries: the purpose underlying the municipality’s participation in the service, and the nature of the relationship between the municipality and those being charged. Where the municipality is acting out of duty — because it is legally obligated to perform the service — and where the benefit of that service runs to the general public rather than to specific parties, the municipality is acting in its public capacity. The absence of any contractual relationship between the government and those being charged reinforces that conclusion. Under those circumstances, the charge is a tax and the inquiry ends there.

If the analysis reaches the second step, it evaluates whether the charge is reasonably proportional to the value of the service received. Here, the municipality may be acting in a “quasiprivate” capacity — providing a discrete service that specific individuals or property owners have sought out, received, and agreed, whether expressly or implicitly, to pay for. This includes things like municipal water and trash collection. When a municipality acts in this quasiprivate capacity, “[t]he obligation to pay for [the service] rests either on express or implied contract on the part of the consumer to make compensation for [service] which he has applied for and received.” (quoting Jolly v. Monaca Borough, 65 A. 809, 810 (Pa. 1907)).

The Supreme Court had no trouble concluding that West Chester was acting in its public capacity. The stormwater program was driven by federal and state regulatory mandates — specifically the Clean Water Act’s NPDES permitting requirements and Pennsylvania’s Storm Water Management Act — and not by any intent to provide an individualized service to property owners. The Borough’s own ordinance said so, explicitly describing the charge as funding the Borough’s compliance with regulatory requirements. And there was no meaningful contractual relationship between the Borough and the property owners being charged. The charge applied to every property in the Borough with impervious area. Merely having impervious area on one’s property was not an implicit agreement to be charged for stormwater services.

Bigger Problems for Stormwater Fees

While the Borough of West Chester court was clear that municipalities can operate in a “quasiprivate” capacity and lawfully charge fees for some services, the Court suggested that stormwater management may not be one of those areas. The Court remarked that stormwater management services are “. . . not the kind of service that all property owners would seek out.”

The obvious issue with stormwater is that it is generated by rainfall. There is, as the Court noted, “. . . no apparent action by a property owner that would instigate each use of a stormwater system.” You cannot meaningfully be said to have contracted for a service simply because it rains and there is impervious surface on your property. Rain falls, runoff flows, and the municipality manages the consequences — whether or not any individual property owner has done anything to trigger the need for that management, whether or not they are aware of it, and whether or not they derive any direct benefit from it. This strongly suggests that stormwater management is a core governmental function and not a specific benefit provided in a quasiprivate manner.

The Political Convenience Problem

The proliferation of stormwater “fees” across Pennsylvania is not likely a product of confusion about legal categories. Calling a charge a “fee” rather than a “tax” is politically easier. It avoids the public resistance that comes with raising taxes. It sidesteps constitutional requirements that apply to taxation. It also allows charges to be assessed against properties that are otherwise exempt from real estate taxes — churches, nonprofits, universities, hospitals, and Commonwealth entities like West Chester University.

For property owners, the practical implication is worth stating plainly. If your municipality or municipal authority has been assessing a stormwater charge against your property — particularly if your property is otherwise tax-exempt or if the charge has grown substantially over time — the legal foundation for that charge may be shakier than the bill suggests. That is an issue that is worth exploring and the details matter.

This framework collapses if stormwater “fees” are actually “taxes.” For municipalities, this puts the prospect of raising taxes on the table and forces a reckoning with properties and owners who cannot be taxed. That is a political problem for municipalities, but not a fatal blow to their ability to fund stormwater management. Municipalities derive their taxing power from the General Assembly and can, when acting within that delegated authority, impose taxes. A municipality could call its stormwater “fee” what it likely is — a “tax” — and move on.

But municipal authorities cannot make this pivot. They cannot tax. See, Evans v. West Norriton Township Municipal Authority, 87 A.2d 474, 479 (Pa. 1952) (“neither the Legislature nor a local elected municipal body can delegate to any appointive body the power to levy taxes”). If a municipal authority is collecting stormwater management “fees” where that “fee” is actually a “tax,” the authority has no lawful basis to demand or collect those payments.

The Municipality Authorities Act permits authorities to impose charges for stormwater services. But statutory authorization for fees does not transform a “tax” into a “fee.” The label the legislature uses in an enabling statute does not override the substantive legal analysis courts apply to determine whether a charge is actually a fee or a tax. Borough of West Chester makes clear that the analysis turns on the nature of the service relationship and the purpose driving the charge — not on what the authorizing statute calls it.

At minimum, municipal authorities that charge stormwater management “fees” will need to examine their foundational documents — what the basis for the authority’s existence is, how their “service” is provided, and what the “fees” are based on. It is likely that many will find that their “services” and the associated “fees”  follow West Chester’s structure. This could be the end of many municipal authorities that were specifically created to address stormwater management, potentially forcing municipalities to reacquire infrastructure and property that had been transferred to an authority.

Where This Leaves Things

The Supreme Court did not hold that stormwater management can never be funded through fees. There may be program structures — ones more directly tied to parcel-specific remediation services, with charges more closely calibrated to the actual benefit delivered to each property — that survive scrutiny. In Part 2 of this series, we examined whether assessments on “all properties benefited by a specific storm water project” under subsection (b)(2) of the Second Class Township Code might offer a more defensible foundation. We will take up that question directly in Part 4, where we examine what Justice Mundy’s concurrence tells us about whether any stormwater fee structure can actually work — and what it would have to look like.

For many stormwater programs that currently operate across Pennsylvania — broadly applicable charges tied to impervious surface area, funding a mix of regulatory compliance obligations and general watershed improvements — the Borough of West Chester decision is a serious problem. The legal principles the Supreme Court applied are not new. They have been on the books for decades. What the decision makes clear is that those principles were not suspended when municipalities and authorities decided that calling something a “fee” was perhaps more convenient than calling it what it is - a tax.

The Borough of West Chester decision does not solve Pennsylvania’s stormwater funding problem — it clarifies it. Municipalities and authorities that have been collecting stormwater “fees” now face a choice: restructure those programs on legally defensible grounds or confront the consequences of these “fees” actually being “taxes.” Neither path is easy, but the Supreme Court has now reinforced longstanding law that simply calling something a “fee” does not mean that it is.

If you own commercial, agricultural, or residential property in Pennsylvania and are paying a stormwater management charge, or if you are a municipality or municipal authority evaluating your stormwater program in light of the Borough of West Chester decision, the attorneys at Houston Harbaugh’s Renewable Energy, Zoning and Land Use practice can help. Contact Brendan A. O’Donnell at (412) 288-2226 or odonnellba@hh-law.com.