On April 30, 2026, the Pennsylvania Supreme Court issued a significant decision in Borough of West Chester v. Pennsylvania State System of Higher Education,[1] holding that the Borough’s stormwater charge is a tax — not a valid fee for service — and therefore cannot be collected from a state university immune from taxation. The ruling has immediate implications for property owners receiving stormwater bills and for the many Pennsylvania municipalities that rely on stormwater charges to fund Clean Water Act compliance and related local infrastructure.
Background
The Borough owns and operates a small municipal separate storm sewer system (MS4) as part of a broader stormwater management system. In June 2016, the Borough Council adopted Ordinance No. 5-2016, imposing a “stream protection fee” — referred to in the litigation as the Stormwater Charge — on all owners of developed properties deemed to benefit from the Borough System. The Stormwater Charge is calculated based on the amount of impervious surface on each developed property and deposited into a dedicated Stormwater Management Fund, which finances stormwater program implementation, system construction and maintenance, debt service for capital projects, and related regulatory compliance activities.
The Pennsylvania State System of Higher Education (PASSHE) owns land in the Borough, and was assessed the Stormwater Charge, but refused to pay, asserting the charge was a tax from which it enjoys sovereign immunity. The Borough filed a petition for review in the Commonwealth Court seeking declaratory judgment.
The parties filed cross-applications for summary relief, and the Commonwealth Court granted PASSHE’s application, concluding the charge is a general tax.
What the Court Decided
Writing for a four-justice majority, Justice Kevin Brobson articulated a two-step framework for distinguishing a fee for service from a local tax. As step one, a court must determine whether the municipality is performing the service in a quasi-private or public capacity by examining: (a) the purpose underlying the municipality’s participation in the service, and (b) the nature of the relationship between the municipality and the recipients of the service. If the municipality acts in its public capacity, the charge is a tax and the inquiry ends. Only if the municipality acts in a quasi-private capacity does a court proceed to step two, which asks whether the charge is reasonably proportional to the extent of use or the value of the service rendered.
Applying that framework, the majority concluded West Chester Borough operates its stormwater program in its public capacity because (1) the program is driven by federal and state mandates (Clean Water Act, NPDES permits, Pennsylvania Storm Water Management Act) rather than a desire to benefit individual landowners, (2) the ordinance emphasizes public health and welfare, and (3) the benefits flow to the community at large rather than to individual ratepayers. The Court also rejected the idea that owning impervious surface or having access to a credit/appeal process creates the kind of voluntary, contractual relationship needed to support a fee.
Because the majority concluded the Borough acts in its public capacity at step one, it did not reach the proportionality analysis at step two.
Key Takeaways
Stormwater bills may be subject to challenge. If a municipality’s charge is framed around regulatory compliance, public health, and general environmental benefit — rather than a discrete service to one’s property — the charge may be a tax rather than a fee.
Tax-immune entities have a strong defense. State universities, state agencies, and other Commonwealth instrumentalities are not required to pay charges classified as taxes.
Stormwater utility revenues are at risk. Municipalities relying on stormwater utility charges should expect challenges from property owners and should reassess budget assumptions as a result.
Ordinance language matters. Findings emphasizing regulatory mandates and general public welfare cut against a fee characterization. To preserve fee status, ordinances should articulate the discrete, individualized benefit each payor receives and tie the charge to the service rendered.
Justice Sallie Mundy’s concurrence offers a roadmap. Justice Mundy wrote a concurring opinion wherein she reserved judgment on stormwater charges in other municipalities where proceeds are directed solely to stormwater remediation, and she declined to foreclose the possibility that a differently structured charge could qualify as a fee. A charge whose proceeds are limited to direct stormwater remediation — and that is calculated based on the runoff benefit to each property from nearby properties — may still qualify as a fee. In Justice Mundy’s opinion, spending stormwater funds on tree planting, street sweeping, or general beautification weakens the case for fee treatment.
Bottom Line
The Borough of West Chester decision affirms that stormwater charges driven primarily by regulatory mandates and aimed at the broader public good will be treated as taxes (meaning Commonwealth-immune entities cannot be required to pay them), and the cost burden may shift to other local taxpayers. Property owners with arguable immunity defenses should re-examine their stormwater bills, while municipalities should revisit ordinance language, fund usage, and rate-setting methodology to determine whether their programs can be restructured to preserve fee status.
If you have questions concerning this post, please contact Brigid Landy Khuri, Scott Gould, or another member of the McNees Energy and Environmental Law Group.
[1] —A.3d —, 2026 WL 1204133 (Pa. 2026).