PA Supreme Court Holds That Municipal Stormwater Charge Is a Tax, Not a Fee

On 30 April 2026, the Pennsylvania Supreme Court (the Court) issued its long-awaited decision in Borough of West Chester v. Pa. State System of Higher Education & West Chester University.¹ A majority of the Court held that the Borough of West Chester’s (the Borough) charge for stormwater management services constitutes a tax, not a fee, from which the Pennsylvania State System of Higher Education (PSSHE) and West Chester University are immune. 

The decision has important implications that extend well beyond the parties in the dispute at issue, as many municipalities and municipal authorities across the Commonwealth have adopted relevantly similar stormwater charge programs. Pennsylvania businesses and landowners should be cognizant of whether they are subject to such stormwater charges, and consider how those programs, and their payment obligations, may be impacted by the Court’s decision.  

The Majority’s Two-Step Test for Distinguishing Taxes From Service Fees

Four of the Court’s seven Justices (Brobson, Todd, Dougherty and Mundy) joined in the Court’s majority opinion, which sets forth a two-part test for distinguishing a municipal service fee from a local tax. First, a court must determine whether the municipality is performing the service in its public or quasiprivate capacity. If the municipality is acting in its public capacity, then the associated charge is a tax and the inquiry ends. On the other hand, if the municipality is acting in its quasiprivate capacity, then the court must proceed to the second step, under which it must determine whether the charge is reasonably proportional to the service rendered. If so, it is a fee; if not, it is a tax.

Applying this test, the Court determined that the Borough’s stormwater charges are taxes, not fees, under the first step of the inquiry. The Court found that the Borough provides stormwater management services in its public capacity, for the benefit the public generally and not particular landowners. This conclusion was supported by the lack of any voluntary contractual relationship between the Borough and the property owners who are subject to the charge (as may exist when a municipality provides water or sewer services). Because the Borough’s stormwater charge qualified as a tax, the Court found that PSSHE and West Chester University, as instrumentalities of the Commonwealth, were immune from any payment obligations.

Under the majority’s mode of analysis, many (if not all) municipal stormwater charge programs across the Commonwealth could very well be construed to impose taxes, not fees. 

The Concurring and Dissenting Opinions

Justice Mundy issued a separate concurring opinion, and Justices McCaffery and Wecht each issued opinions dissenting from the key holding in the case. Justice Mundy indicated that she was joining the majority opinion “in the present circumstances” but reserved judgment “as to stormwater charges in other municipalities where the proceeds are directed solely to stormwater remediation” or “where the amount of the charge is calculated in substantial part according to the benefit accruing to each property based on the amount of runoff from nearby properties.” Justice McCaffery (joined by Justice Donahue) would have reversed and remanded the case to Commonwealth Court to determine whether the amount of the charge billed to the university was proportional to the benefits it receives from the Borough’s stormwater management system. Justice Wecht, meanwhile, believed that the stormwater charge qualified as a fee that the university was required to pay.

Ramifications

This decision has several important implications for local governments and landowners across the Commonwealth. 

First, barring some rationale for distinguishing other municipal stormwater charge programs from the Borough’s stormwater charge, other tax-exempt entities may similarly be able to claim immunity from any payment obligations. This could ultimately have the effect of imposing a greater share of costs for stormwater management on nonexempt landowners as municipalities restructure their existing stormwater charge programs.

Second, many local stormwater charge programs currently in place have been adopted by municipal authorities created under the Municipality Authorities Act. Municipal authorities, whose governing bodies are appointed rather than elected, lack any power under the Pennsylvania Constitution to impose taxes. For this reason, the Court’s decision calls into question the legality of certain stormwater charge programs adopted by municipal authorities, despite their statutory authorization to impose stormwater management fees.²

Third, while municipalities have the authority to impose taxes, they must do so in compliance with the procedural requirements of the Local Tax Enabling Act and be consistent with the Uniformity Clause of the Pennsylvania Constitution. The Pennsylvania Constitution requires taxes to be levied uniformly on the same class of subjects, and it only permits exemptions for places of religious worship, burial grounds, public property used for public purposes, institutions of purely public charity, and for persons in need of exemptions or special provisions due to age, disability, or infirmity.³ Accordingly, ordinances that use progressive or regressive rate schedules based on factors such as water utilization, treat business versus residential property differently, or provide unauthorized types of exemptions may be subject to constitutional challenges. Questions may arise as to the compliance of stormwater charge programs with these requirements.

Finally, for tax-exempt entities, the Court’s decision may generate rights to seek refunds of taxes paid for the last three years, plus interest.⁴ The same remedies may also be available to other entities if ordinances are held to violate provisions regarding the permissible scope of tax exemptions or special provisions.

Businesses and property owners located in municipalities with stormwater management programs should consider how their payment obligations may be impacted by the Court’s decision. The firm's lawyers will continue to monitor judicial and policy developments relating to stormwater charges in the wake of the Court’s decision and are well positioned to assist.