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The city of Chester’s financial viability has deteriorated to the point where the state-appointed receiver is weighing the possibility of disincorporating the city altogether — a situation he is trying to avoid.
Receiver Michael Doweary and his chief of staff Vijay Kapoor relayed the information to the public during Tuesday’s virtual Municipal Financial Recovery Advisory Committee meeting, which is just days before the three-year anniversary of former Pennsylvania Governor Tom Wolf declaring a fiscal emergency in Chester.
“We are desperately trying to avoid disincorporation. It is the worst possible outcome for everybody involved. But just as we warned months ago about the possibility of bankruptcy, we need to do the same with disincorporation. It is a possibility. It’s not something we want, but it is a possibility,” Kapoor said.
While the receiver filed for bankruptcy on behalf of the cash-strapped city in November, Doweary’s office believes ongoing litigation levied by city officials to block the bankruptcy proceedings and modifications of the recovery plan has prevented them from rescuing Chester’s failing finances.
Disincorporation would mean Chester would lose its charter and would functionally cease to exist if a solution is not reached by the end of the year. City employees would be laid off, elected officials would be removed from office, and the Pennsylvania Department of Community and Economic Development would appoint an administrator to handle vital services for the area.
Municipal bankruptcy filings are rare. Municipal disincorporations are almost unheard of.
“It would be the absolute worst case scenario for everybody here involved employees, retirees, residents, residents of the city of Chester, residents of Delaware County, residents of the region,” Kapoor said
According to Kapoor, the city would have run out of money by this September, but for agreements made between Chester’s bankruptcy counsel and some of its creditors. The receiver’s team has made considerable improvements to the issues plaguing the city’s police pension plan, but as of March, there were only 16 months of benefits left.
Chester’s funds remain critically low. The receiver’s team projects Chester will have an operating deficit in 2024 and an “insurmountable deficit” in 2025. Doweary believes any solution would take a year to put into action, so he said it needs to happen by the end of this year.
“We need to have a plan of adjustment in place by the end of this year, considering how long it will take to implement the plan. We don’t have a choice,” Doweary said.
In February, a majority of elected officials, with the exception of Councilmember Stefan Roots, appealed a ruling from the Commonwealth Court that stripped them of their administrative duties.
And in late March, the Pennsylvania Supreme Court stepped in and issued an order, halting the decision from the lower court and allowing elected officials to remain as department heads. Additionally, a group of city officials recently appealed an opinion from the court finding Chester eligible for Chapter 9 bankruptcy.
Kapoor said these appeals are wasting valuable time and resources and that court decisions in both of these matters “will take months to resolve.” Doweary doesn’t think the city has enough time.
Act 47 gives Doweary the power to recommend Chester for disincorporation.
“We are running out of time, to be very clear. Chester has been under some type of state oversight for over 28 years,” Kapoor said. “It does not have 28 more years.”
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