PA Supreme Court Rules West Chester Stormwater Fee Is Unlawful

A municipal charge does not become a fee simply because it is labeled as such. The Pennsylvania Supreme Court recently reaffirmed that principle in Borough of West Chester v. Pennsylvania State System of Higher Education, 2026 Pa. LEXIS 775 (Apr. 30, 2026), holding that West Chester’s “stream protection fee” is, in substance, a local tax, one from which the commonwealth and its instrumentalities are immune.

This opinion serves as a timely and instructive reminder of a deceptively simple question that has long challenged local government law: when does a governmental charge qualify as a regulatory fee, and when does it cross the line into an unauthorized tax? Although the distinction appears straightforward in theory, courts in Pennsylvania have grappled with its application for more than a century, with significant consequences for municipal authority and intergovernmental immunity.

In 2016, the borough, a home rule municipality, adopted an ordinance which imposed a “stream protection fee” on all developed property within the borough, with the charge calculated based on the amount of impervious surface on each parcel, the opinion said.

Revenue was directed to a dedicated stormwater fund used for operating the borough’s separate storm sewer system, debt service on stormwater capital projects and broader stormwater-management initiatives.

West Chester University, whose north campus is located within the borough, refused to pay the charge, according to the court’s opinion. The university, together with its parent entity, the Pennsylvania State System of Higher Education (PASSHE), asserted that they are instrumentalities of the commonwealth, that the so‑called fee functions in substance as a local tax, and that they are, therefore, immune from its application.

The borough sued for declaratory judgment and the Pennsylvania Commonwealth Court ruled unanimously for West Chester University.

The borough then appealed that appellate ruling to the Supreme Court.

Writing for a four-Justice majority, Justice Kevin Brobson took the opportunity to consolidate more than a century of case law in Pennsylvania into an explicit two-step test for distinguishing fees from taxes. The framework draws principally on Jolly v. Monaca Borough, 65 A. 809 (Pa. 1907) and Supervisors of Manheim Township v. Workman, 38 A.2d 273 (Pa. 1944).

At step one, a court asks whether the municipality is acting in its “public capacity” or its “quasi-private capacity” when providing the service. A municipality acts publicly when it is performing a nondelegable governmental duty for the benefit of the community at large, with no contractual relationship with the recipient. It acts quasi-privately when it is providing a discretionary service, historically things like supplying water, gas, garbage collection, or sanitary sewer service, under what amounts to an express or implied contract with the user. If the answer at step one is “public,” the analysis ends and the charge is a tax.

Only if the activity is quasi-private does a court reach step two: whether the charge is reasonably proportional to the value of the service rendered. A disproportionate charge for an otherwise quasi-private service is, as the Supreme Court put it in Manheim Township, in legal effect, undoubtedly a tax.

The majority of the Supreme Court in Pennsylvania State System of Higher Education concluded that the borough’s stormwater program failed step one for two for independent reasons.

First, the Supreme Court concluded that the program’s purpose is overwhelmingly public.In doing so, the Supreme Court pointed out that the ordinance itself recited that stormwater management is “fundamental to the public health, safety, and general welfare” of the borough’s residents and that the borough was acting, at least in part, to satisfy its own permit obligations under the Clean Water Act and other governmental regulations. The Supreme Court found this telling.

Where the impetus for a service is a regulatory duty imposed on the municipality itself, and where the benefits (flood mitigation, cleaner waterways, reduced pollutant loads) flow primarily to the community at large rather than to a discrete payor, the Supreme Court noted that activity bears the hallmarks of governance, not commerce.

Second, the Supreme Court reasoned that there was no genuine contractual relationship. The Supreme Court emphasized that the ordinance imposed the charge “upon each and every developed property” that was “connected with, uses, is serviced by or is benefited by” the borough system, “either directly or indirectly.” That sweep, the Supreme Court’s majority observed, was incompatible with the voluntary, contract-like dynamic that defines quasi-private service.

According to the Supreme Court, a property owner cannot meaningfully “agree” to stormwater management the way a homeowner agrees to take water from the municipal supply, in that the rain falls regardless, and the only way to opt out is to demolish every impervious surface on the lot or move out of the Borough.

The Supreme Court stated that the credit and appeal process the borough offered did not change this analysis. Rather, the Supreme Court characterized it as a mechanism to seek relief from a unilaterally imposed charge, not as evidence of any underlying contract. Since the borough acted in its public capacity, the majority of the Supreme Court did not reach the proportionality question.

For practitioners, the opinion rendered by the Supreme Court is a useful one to keep close at hand. The Supreme Court rarely takes the opportunity to consolidate doctrine this old and this scattered, and the two-step framework articulated in Brobson's opinion will likely govern fee-versus-tax disputes in Pennsylvania for some time, whether the charge in question is for stormwater, refuse, sewage or something the next ordinance writer has not yet imagined.

Ultimately, however, the decision is less about stormwater than it is about the limits of municipal power. Once the Supreme Court concluded that the borough’s “stream protection fee” was imposed to fund a public service undertaken for the benefit of the community at large (and not pursuant to any voluntary, contractual relationship), the label affixed to the charge could not save it. In substance, it was a tax. And because municipalities possess only such taxing authority as the General Assembly has expressly delegated, that conclusion carried dispositive consequences—absent a clear legislative authorization, the borough could not impose that tax on the commonwealth or its instrumentalities.

In that sense, the Supreme Court’s ruling in Pennsylvania State System of Higher Education is a reminder that the fee-versus-tax distinction is not merely academic. It is jurisdictional. Where a charge crosses that line, it does not just change categories, but rather it changes outcomes.

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This article was prepared by a licensed Pennsylvania attorney at Nochumson P.C., a Philadelphia-based law firm with extensive experience in all thing's real estate, litigation, land use and zoning, and business counseling.

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