Facing fiscal peril, City of Chester is put into receivership

The City of Chester has entered an unfortunate new phase in its decades-long financial struggle. A Commonwealth Court judge issued a ruling in late June that started the process of receivership, just the second time such proceedings have been instituted by the state. Receivership is the process in which the state appoints a manager with a degree of direct control over local finances to avoid bankruptcy.

Now, the appointed receiver, Michael T. Doweary, and a team of advisers will work with the city to potentially restructure services and financial liabilities to avoid bankruptcy and harm to residents. Doweary is the former business administrator for the City of York.

News of Doweary’s appointment was first reported by the Delaware County Daily Times and the Chester Matters Blog.

In a detailed statement earlier this month, Doweary’s office wrote that, under Pennsylvania’s Municipalities Financial Recovery Act, the goal is to get the city financially solvent and on a path toward economic recovery.

“Great resources are being assigned to the city through this team, but it’s extremely important that city officials and stakeholders be committed to working together to make the tough decisions to get the City of Chester back on its feet,” the release said.

Doweary’s team consists of several financial advisers, consultants, and a communications company. They’ll be putting together an economic plan “in the coming weeks,” which will then be reviewed by judicial, state, and local officials.

Though Chester’s financial distress is not new, it has accelerated in the last few months. The city first entered the Municipalities Financial Recovery Act, or Act 47, process in 1995, according to the state’s Department of Community and Economic Development. But a decline in city revenues because of the coronavirus pandemic is exacerbating longstanding issues funding public pensions.

“The city’s legacy costs, which consist of debt, pension, and other post-employment benefits, continue to place enormous pressure on the city’s finances, including both the month-to-month cash flow and long-term liabilities,” the department said in April.

That month, Gov. Tom Wolf issued a “declaration of fiscal emergency” for Chester because the city was approaching “financial peril.”

In a note to residents attached to the July 1 press release, the city’s receiver wrote that the police pension fund is nearly gone, which means that in four months Chester will no longer be able to send payments to retired officers.

“There is no one clear answer on a way out,” Doweary added. “I do not have any preconceived ideas about actions to take, and everything is on the table. My decisions will be made based on the answer to this question: Is it in the best interest of Chester residents?”

The communications group handling media inquiries on Doweary’s behalf did not respond to an interview request.

In 2018, a consulting group issued its report to the state on a plan for getting Chester to financial solvency. The recommendations included shrinking the city workforce, cutting retirement benefits for new hires, decreasing or eliminating some business taxes, potentially consolidating fire service, reducing blighted properties, and getting more training for grant writing. Few of those proposals have been taken up.

Chester is only the second city in Pennsylvania to go into receivership. In 2010, Harrisburg underwent the process.

The Office of Receiver has a large toolkit for implementing financial reforms, but local cooperation is required for them to be fully executed. So far, Chester Mayor Thaddeus Kirkland has praised Doweary.

“Myself and Council are pleased to welcome Michael Doweary to the city of Chester,” Kirkland said Tuesday in a brief emailed statement. “As we all work collaboratively to ensure perpetual financial stability for this community, I am confident that his efforts will move us onto that trajectory. Michael Doweary is an asset, whose skills and expertise will help this administration accomplish goals that benefit residents and stakeholders alike.”

According to the Department of Community and Economic Development, 15 municipalities across Pennsylvania are deemed financially distressed, but only Chester is currently in receivership.