A year later, two Delco communities on steadier financial footing

Chester and Colwyn saw tumultuous times in 2016, and have plans for a better 2017.

A year ago, the borough of Colwyn and the city of Chester, both in Delaware County, were each facing the possibility of a state takeover if they didn’t straighten out their finances.

Both municipalities have been trying to pull back from the brink of insolvency with the help of Act 47, Pennsylvania’s program to help distressed communities.

There were some heated public meetings in 2016, where community members and leaders struggled with the reality of financial recovery. While many cities and boroughs languish under state supervision, officials are hopeful that in 2017, Chester and Colwyn will buck that trend. 

Two paths to Act 47

In Pennsylvania, municipalities falter when the costs to provide basic services exceed their revenues. Stay in that position too long and the state steps in to provide oversight and consultation via Act 47.

Colwyn Borough and the City of Chester are on opposite ends of a spectrum of how Pennsylvania municipalities wind up with that designation.

In Colwyn, a Philadelphia bedroom community of fewer than three-thousand people, the main ailment is mismanagement.

“The primary cause of the Borough of Colwyn’s fiscal distress is the failure of its elected officials to run an open government,” reads the borough’s Act 47 Plan, approved in December 2015. “The Borough has been operating for years without required audited financial statements. The last year for which an audited financial statement exists is 2011. No audit exists for 2012. No audit exists for 2013. No audit exists for 2014.”

Colwyn entered Act 47 relatively recently, in 2015.

On the other hand, Chester, a formerly industrial city now with a population of about 34,000, is a more typical picture of declining Pennsylvania cities. Businesses and residents have left in droves, leaving the city starved for the tax base necessary to support its infrastructure and services. Chester has been designated an Act 47 city since 1995.

“Chester has struggled with re-defining itself following its boom years as a manufacturing and distribution center,” said the city’s Act 47 report, which also notes Chester’s high poverty rate as a hurdle to bringing in revenue to provide much needed services.

But while Colwyn and Chester have different problems, their but their medicine is the same — make a plan and stick to it, or get taken over by the state.

Accounting for Colwyn

In Colwyn, state-hired consultants like Daniel Connelly, director of Fairmount Capital Advisors, have been working with elected officials to implement basic accounting practices.

“They did hire a borough manger, they’ve made huge gains in building the financial management infrastructure, they’ve hired a treasurer,” said Connelly, ticking off Colwyn’s successes in 2016. Those changes represent a big step forward for a place that didn’t keep any coherent financial records for several years.

Connelly said he expects Colwyn to graduate from Act 47 in three to four years, if its leaders don’t fall back on bad habits, such as “treating the budget as a piece of paper with numbers on it that was nice to pass, but not something they have to follow.”

And, he said, the public shouting matches among elected officials, residents and administrators that made the news in 2015 have subsided.

“We don’t have the same sort of sideshows we once did. That doesn’t mean its hunky-dory, but it’s better than it was.”

Chester: a fix, but not an “overnight fix”

In Chester, the financial problems are thornier and the the state’s medicine harder to swallow.

After more than 20 years under Act 47 state supervision, many residents expressed concerns and resentment over yet another state-led financial recovery plan, introduced in August 2016.

“What are recovering from? Is it self-inflicted? Or is it something you guys did?” said Tehran Freeman to a panel of state-hired consultants, during a standing room-only public meeting last summer.

The new plan for Chester, many said, went too far in decreasing funds for public safety in the city.

“You’re talking about cutting back police officers in a city where you got people getting killed every week,” said Freeman at the same meeting, to a round of applause from the audience.

While Chester has dwelled in Act 47 for twenty years, the state recently increased pressure on cities in the program, shortening the runway for taking off or getting taken over to three years.

In order to balance the city’s books, the state made recommendations to drastically reduce government positions as well rein in public safety pension costs. A recent report by the Pennsylvania Auditor General pointed out Chester police and firefighters had been boosting their pensions by working “unbelievable” amounts of overtime in 2013 to 2015.

City officials are taking steps to curb those costs in new labor contracts, as old ones expire with the end of 2016, said chief financial officer Nafis Nichols.

“Some of the things you’ll see in the fire deal will be around the retirement age…to keep people around longer to have more contributions go into the pension fund,” said Nichols. Police and teamster contracts are also in negotiations, said Nichols. In order to cut costs without laying off officers, he said the city will lose several police officers to retirement this year and will refrain from replacing them immediately. City government staff will also be reduced from 80 people to 71 in 2017.

On the revenue growth side, city council voted to raise earned income taxes on residents from 2.1 percent to 2.75 percent, in December 2016, as recommended in the plan. As coffers are buoyed by the additional revenue, officials plan to begin gradually lowering the earned income tax rate starting in 2018. Elected officials also voted to lower businesses taxes, with the hope of eventually boosting the city’s revenues by attracting new tenants.

Another state recommendation, to add an amusement tax for ticket sales in the city, was tabled for the time being.

Nichols, who moved from city council into the position of CFO after it was created on the recommendation of Act 47 consultants, urges residents to have patience.

“This didn’t happen overnight, it’s not going to be fixed overnight,” he said.

If the 2017 budget is any indication, Chester is getting back on the right track and is projecting a more than $4 million dollar budget surplus, according to Nichols.