‘A lot of red flags’: Chester receiver demands city stormwater authority’s financial records

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Chester’s state-appointed receiver is demanding the Stormwater Authority for the City of Chester hand over its financial records. The authority is not budging.

Receiver Michael Doweary filed a motion with the U.S. Bankruptcy Court on Thursday asking a federal judge to intervene. The receiver’s office, which is tasked with rescuing the bankrupt city’s purse, has serious concerns about the authority’s management of budget and funds.

In the court filing, Doweary alleges the city stormwater authority employed an “organized strategy to stonewall” the mayor’s office and his office from necessary access.

Doweary wrote in his preliminary statement that “the City has significant concerns about the financial condition, operations, management and governance of the authority.”

Vijay Kapoor, chief of staff to the receiver, said in an interview that the receiver wants a better understanding of the authority’s financial condition and any issues it might be facing.

“For a city that’s in Chapter 9 bankruptcy, you do not want to have an authority that is in financial disarray,” Kapoor said. “And the receiver’s focus has obviously mostly been on the city of Chester itself. But, we can’t turn a blind eye to an authority that is potentially financially struggling as well, especially when that authority could be part of an agreement or a plan that can help the city get out of bankruptcy.”

Attempts to ask the authority directly have not been fruitful.

“Several months ago, the mayor asked for this financial information and essentially was not provided with it,” Kapoor said. “The receiver then asked and was sent back a letter saying that the receiver was not entitled to it and that if the receiver wished to try to obtain something like this that he needed to file a Right-to-Know request.”

Dr. Horace Strand, executive director for the authority, said it’s a matter of respect. He said neither Doweary nor Roots have shown any respect or regard toward him.

“We didn’t give them the financial documents because our lawyer told us that we didn’t have to — that they were overstepping their authority to try to interfere with the operations of a municipal authority in the state of Pennsylvania,” Strand said. “They don’t want to respect us as an authority.”

Chester stormwater authority borrowed money from executive director to make payroll

Chester city government created the authority in 2016 to provide stormwater management. Strand said the authority manages the city’s more than 2,000 inlets.

Homeowners now fork over double the rate in fees from when it was first established. According to the receiver’s office, Chester residents pay among the highest stormwater fees in the country. The authority has been receiving massive loans from PENNVEST.

“Our concern is that you have authority that is in bad or critical financial shape whose only recourse then is to raise fees on its residents,” Kapoor said.

Despite the hike in fee revenue, Kapoor said the receiver’s office has reasons to believe the stormwater authority is experiencing financial troubles.

“Part of the concern that the receiver had was that apparently, in October of last year, the authority took out loans from the executive manager and his church in order to make payroll — which is something that, frankly, we’ve never seen before and it raised a lot of red flags for us,” Kapoor said.

The situation Kapoor referenced is reflected in the stormwater board’s Oct. 10 meeting minutes. Board member Livia Smith acknowledged at the meeting the authority receiving loans of $25,000 from Faith Temple Holy Church and $15,000 from Strand is “an unorthodox way of borrowing money in order to meet payroll.”

Strand said the stormwater authority has only had one cashflow incident since its inception. He inferred that was caused by Roots’ criticism of the authority during his campaign, which refrained residents from making payments.

“We had to lay off some of our workers, and in the process of laying them off, we didn’t have enough money to pay them,” Strand said. “I, personally, would not allow these men to go home without a paycheck and I intervened to bring in $40,000 to get them paid until the funds came back in from the authority. So I mean if that’s something I did wrong or something like that then, out of human compassion I had concern for my workers. That’s the first time I had to do that in seven years.”

Since then, Strand contends that the authority is financially sound and that all of its equipment is paid for. According to Strand, the authority raised the stormwater rates to account for the loans that had matured.

“It is one of America’s success stories — a low-income, minority community helping itself in solvings its own problem. And that’s what they don’t like,” Strand said. “They want to be able to say that Chester can’t help itself or we’re not qualified to manage our own government that they need.”

Doweary’s filing also pointed to the controversy over board appointments. Chester Mayor Stefan Roots accused two council members of violating city charter in April. The city charter states no council member should “hold any other compensated position in the City of Chester government.”

Councilmembers Fred Green and Portia West receive a salary for their elected services — and another salary for their positions on the stormwater authority board.

While the two council members initially resigned from the board positions, they eventually returned to those positions. In defense of its board members, the authority contends that Title 11 of the Third-Class city code allows elected officials to sit on any boards.

Roots said he’s in lockstep with the receiver.

“Overall in national politics, you hear the term ‘witch hunt.’ I am not executing a witch hunt on any of our authorities,” Roots said.” I just need to be caught up on how our authorities work, how they’re formed, how they’re funded, how they’re functioning. When the information isn’t forthcoming, when there wasn’t any type of transition from the former mayor to myself with regards to the authority, it’s incumbent upon me and my team to ask the simple questions. It is concerning when the simple questions don’t solicit simple answers.”

Strand said if Doweary and Roots want to sit down and meet, the authority’s accountants are accessible to them.

“We’ll show them anything they want to see, but give us the respect you give DELCORA or the respect you give the Chester Water Authority,” Strand said.