New uncertainties for clean water in Pennsylvania: How a recent Pennsylvania Supreme Court decision impacts stormwater funding across the state

PennFuture Update: Borough of West Chester v. Pa. State System of Higher Education Decision

On April 30, 2026, the Pennsylvania Supreme Court issued its decision in the Borough of West Chester v. Pennsylvania State System of Higher Education case, finding that municipal charges related to stormwater are not fees for service, but are local taxes from which state entities are exempt.

What is stormwater runoff and why does it matter?

Stormwater runoff is a leading cause of poor water quality in Pennsylvania. Broadly speaking, stormwater runoff results when the amount of precipitation that falls on an area exceeds the capacity of the ground to absorb it. Stormwater runoff is therefore a function of both the capacity of the ground to absorb rainfall and the amount of precipitation.

Stormwater runoff creates several layers of problems in urbanized and human-impacted areas.

The first threat is to water quality

As the stormwater flows across the ground surface, it collects pollutants such as oil, excess fertilizer, pesticides, sediments, bacteria, pet waste, and trash, and carries them into the receiving waterways—the streams, rivers, and lakes that serve residents of the Commonwealth for drinking water sources, business and industrial uses, recreational opportunities, or simply as part of the larger natural environment that protects mental and physical well-being. Additionally, the sheer increased volume of the runoff itself leads to more flooding, harming both private and public property.

The federal Clean Water Act (“CWA”), Pennsylvania’s Clean Streams Law and the Pennsylvania Stormwater Management Act of 1978 (Act 167) regulate stormwater discharges. Under these laws, municipal separate storm sewer systems (“MS4s”) must obtain a NPDES (National Pollutant Discharge Elimination System) permit for their stormwater discharges, develop a Stormwater Pollution Prevention Plan or Stormwater Management Plan, and implement measures that prevent discharges of the pollutants in stormwater runoff. 33 U.S.C. § 1342(b).

Municipalities typically serve on the front lines of stormwater management: developing stormwater infrastructure, programs, and policies to protect public health and the quality of the environment.

Municipalities use various funding mechanisms to pay for their stormwater management programs. One common mechanism is the implementation of a charge on the user-landowners within the MS4 who contribute to—and benefit from—the system. While a variety of methodologies may be used to calculate the dollar amount of their stormwater service fees, because the amount of impervious (non-porous) surface area on a developed area of land is the most important factor influencing stormwater runoff, it is a commonly used factor.

What happened in the case?

West Chester Borough, a home rule municipality, owns and operates an MS4. In 2016, the Borough enacted a Stream Protection Fee Ordinance. West Chester University refused to pay the Stormwater Charge (totaling approximately $110,000/year) on the basis that it constituted a tax, from which it was immune as a state entity. The Borough contended that the Stormwater Charge was not a tax, but a fee for a service provided to the University. The Borough filed a declaratory judgment action in the Commonwealth Court seeking a declaration to that effect. Both parties moved for summary judgment.

On April 30, 2026, Justice Brobson, writing for the majority, issued the court’s decision. (Borough of W. Chester v. Pa. State Sys. of Higher Educ., No. 9 MAP 2023, 2026 Pa. LEXIS 775 (Pa. Apr. 30, 2026)). Justice Mundy issued a concurring opinion. Justice McCaffery, joined by Justice Donahue, issued a dissent on the substance, concurring only on the procedural question of whether the Commonwealth Court properly allocated the burden of proof. Justice Wecht issued a dissent on the substance, concurring only on the procedural question of whether the Commonwealth Court properly allocated the burden of proof.

The Supreme Court affirmed the Commonwealth Court’s decision, finding the Stormwater Charge to be a tax, not a fee. The Court announced a new framework, based on 1800s caselaw, to distinguish a fee for service from other charges levied under a municipality’s taxing authority. The framework for distinguishing a fee for service from a local tax is best understood as a two-step test:

1. The first step is to determine whether the municipality is performing the service in a quasiprivate or public capacity. This inquiry asks “the purpose underlying the municipality’s participation in the service and the relationship between the municipality and the recipients of the service.”

a. If the municipality is performing a duty for the public benefit, and there is no contractual relationship, it is acting in its public capacity. If the municipality is acting in its public capacity, the inquiry ends: the associated charge is a tax.

b. If it is providing a discretionary service for private emolument, and within the scope of a contractual relationship, it is acting in its quasiprivate capacity. If the result is that the municipality is acting in its quasiprivate capacity, the inquiry must proceed to step two.

2. The second step of the inquiry asks whether a charge is measured by the service rendered. If it is “reasonably proportional to the extent of use of the value of the service rendered, then the charge is a fee.” If there is no connection between the amount of the charge and the services rendered, the charge is a tax.

Applying this two-step inquiry, the Court concluded that the Stormwater Charge was a tax because the Borough provided stormwater management services for the purpose of attaining benefits enjoyed by the entire public and that its performance of these services was not based on voluntary, contractual relationships.

What happens now?

As a result, municipalities with an MS4 permit cannot continue to bill state entities within their jurisdiction for stormwater charges. Notably, the Court did not find the tax itself to be impermissible. The decision does not prevent municipalities from collecting monies to fund stormwater management program, but does limit who municipalities may collect from, and may limit the mechanisms that municipalities can use to do so.

The West Chester decision leaves municipalities with as much uncertainty as ever. Municipalities and clean water advocates will be considering many possible implications and changes. Some immediate issues might include:

• The authority of municipal authorities to institute a stormwater charge was not addressed by the Court, because of the basic facts of the case. Instead, the analysis was solely based on the taxing authority of municipalities. Whether the West Chester analysis will—or even should—apply to municipal authorities is unanswered.

• It is not clear whether municipalities will owe refunds. Pennsylvania has not squarely addressed the issue of whether tax-exempt entities who have paid a then-lawful fee to a municipality may seek refunds of those charges if the charge is subsequently ruled to be a tax. Entities seeking refunds will likely need to do so through legal action, and this will be closely watched issue going forward.

• The ability of municipalities to impose this tax. Justice Mundy’s concurring opinion invited advocacy “[S]uggesting an implied grant of taxing authority can arise where the municipality is required by state law to spend funds on pollution-control projects.” The General Assembly could address this by passing a law that would expressly grant of authority for municipalities to collect taxes from the state for stormwater runoff. Legislative action may also be required to authorize local taxes on stormwater runoff more generally, to make clear that municipalities have the authority to institute this tax. However, the Court did not find that the Borough lacked authority to collect the tax at all, but only that the charge was a tax, and therefore the University was exempt from it.

This is a new and developing area and will almost certainly have a wide and rippling effect on stormwater management across the state. PennFuture will be releasing further analysis and updates.

This memorandum is for informational purposes only and should not be construed as or considered to be legal advice. Affected or interested parties should consult with qualified professional legal counsel.

Further reading: Anthony R. Wood, (2026, June 4). A court ruling in a Chesco case may mean higher stormwater bills in scores of Pa. Towns. Philadelphia Inquirer