Pennsylvania Supreme Court Holds Municipal Stormwater Charge Is a Tax

On April 30, 2026, the Pennsylvania Supreme Court issued a significant decision affecting how municipalities fund stormwater management programs. In Borough of West Chester v. Pennsylvania State System of Higher Education, the Court held that a municipal stormwater “fee” was, in fact, a tax, with implications for how these programs can be structured and funded.

In 2016, the Borough of West Chester adopted a “stream protection fee” to fund its stormwater management system, including infrastructure maintenance and compliance with federal and state environmental requirements. The charge applied to developed properties and was based largely on the amount of impervious surface (e.g., buildings, pavement) on each property. West Chester University and the Pennsylvania State System of Higher Education (PASSHE) refused to pay, arguing the charge was a tax from which they are immune.

The Supreme Court agreed and held that the stormwater charge is a tax, not a fee for service. As a result, PASSHE and the University are not required to pay. The Court applied Pennsylvania’s established framework, distinguishing taxes from fees, and focused on three primary considerations:

• Governmental Function: Stormwater management was deemed a core governmental responsibility, driven by public health, environmental concerns, and regulatory mandates, not a discretionary service offered to individual users.
• Lack of Voluntariness: Property owners did not voluntarily enter into any contractual relationship for stormwater services. The charge was imposed broadly and unilaterally.
• General Public Benefit: The program primarily benefits the community as a whole (e.g., flood prevention, water quality), rather than providing discrete, individualized services to specific properties.

Because the Borough acted in its governmental capacity, the charge constituted a tax, ending the analysis.

Key Takeaways for Municipalities

• Substance Over Labels: Simply calling a charge a “fee” will not control it. Courts will closely examine the purpose, structure, and operation of the program.
• Stormwater Programs May be Viewed as Governmental: Programs tied to regulatory compliance (e.g., MS4/NPDES) and public welfare are likely to be treated as public functions, supporting classification as a tax.
• Voluntary Use is Critical for Fees: A valid fee typically requires some form of voluntary participation or contractual relationship, which is often difficult to establish in stormwater systems.
• Risk of Nonpayment by Tax-Exempt Entities: If a charge is deemed a tax, state-owned and other tax-exempt properties may be immune, potentially impacting revenue projections.

The Court acknowledged the real challenges municipalities face in funding stormwater infrastructure and complying with environmental regulations. However, it made clear that those policy concerns cannot override established legal principles distinguishing taxes from fees.

Municipalities should carefully evaluate existing and proposed stormwater funding mechanisms in light of this decision and consider whether alternative structures may be necessary. Given the complexity of the tax vs. fee distinction, legal counsel should be consulted before implementing changes. The Court’s opinion did not address stormwater fees imposed by municipal authorities. Stormwater authorities and fees are expressly allowed under the Municipality Authorities Act.

The attorneys at Strassburger McKenna Gutnick & Gefsky provide practical, legal counsel to cities, boroughs, townships, zoning boards, planning commissions, and other government agencies. We have earned a reputation for reliable and valuable legal advice that allows our clients to focus their energy and resources on the business of governing. For additional information about this decision or to learn more about our services, contact a member of our Public Sector and Nonprofit Group.

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