‘The status quo has not worked’: Chester’s receiver files for bankruptcy on behalf of the city

Michael Doweary, the state-appointed receiver for Chester, filed for bankruptcy Thursday on behalf of the cash-strapped city.

The hope is Chapter 9 of the U.S. Bankruptcy Code will give Chester protection against creditors while it seeks to fix its growing debts. Doweary’s projections have the city falling into a $46.5 million deficit in 2023 — $39.8 million can be attributed to past due pension payments alone.

“Since my appointment over two-and-a-half years ago, I have worked to avoid this day. However, Chester has a severe structural deficit that cannot be addressed by one-time fixes, has unaffordable retiree benefit liabilities, and cannot reliably provide vital and necessary services to its residents,” Doweary said in a written statement announcing the action.

Under the state’s Municipalities Financial Recovery Act, or Act 47, the receiver has the authority to file a bankruptcy action. Doweary is requesting the appointment of a judicial mediator to find “a consensus solution” to Chester’s issues.

“Chester’s financial and operational problems are by far the worst that my team of professionals has ever encountered. The status quo has not worked, is not working, and will not work. The residents of Chester deserve better,” Doweary said.

Chester slipped into the Act 47 process in 1995. Instead of bouncing back, the city’s crisis only got worse. Gov. Tom Wolf declared a “fiscal emergency” in the city in 2020 and placed Chester under receivership.

WHYY News first reported Chester’s potential free-fall towards bankruptcy in January. From allegations of police pension spiking to disputes regarding city contracts, the city has been unable to climb out of its fiscal emergency.

After he took city officials to court for interfering with financial recovery efforts, Doweary told WHYY News in March that American Rescue Plan Act funds and a $5 million loan from the DCED have kept the city’s pockets from running dry.

In May, the state Department of Community and Economic Development officially granted Doweary the ability to file for bankruptcy, if the time came.

Prior to Chester, only 31 municipalities in the U.S. had filed for bankruptcy since 2001.

“Twenty-seven years of efforts to right Chester’s ship have not worked. For Chester to survive and thrive again, it must take bold and significant steps,” Doweary said in Thursday’s written statement.

Doweary will present more information during a virtual public meeting at 1 p.m. on Tuesday, Nov. 15 live on the office’s Facebook page.